Standing Committee on Canadian Heritage Hearing on the Canadian Television Fund (CTF)

Thursday, February 15, 2007 - from the unofficial and unrevised transcript

On the origins of the Canadian Television Fund (1020):

"I think it's sometimes helpful to remember the history of how this fund was put in place in the first instance.

What happened was that in the old days when the cable companies wanted to make an improvement to their capital infrastructure, whether they wanted to build more transmission capacity or put in better equipment or whatnot, they would go down to the CRTC and they would say, "We would like to do this. If you approve it, please also approve an increase in the basic cable rate to finance it". The commission would say fine. But the deal always was that when those capital improvements had been paid for, then the basic cable rate could go back down again because now they've been paid for.

So about 1993, when all of the basic cable rates were supposed to go back down again, the cable industry came to the commission and said, "Listen, we have a good idea. Instead of sending the money back to the cable customers, how about you let us keep the money and we will split it, fifty-fifty. We'll keep 50¢ of every dollar by which the rates should have gone down and the other 50¢ we will put into the fund".

Now, the commission said "that's a good idea". But the long and the short of it is that the 50¢, well first of all, the entire dollar was originally scheduled to go back to consumers, but the 50¢ that the cable companies got to keep has probably put into their pockets somewhere between $750 million and $1 billion they otherwise would not have had. And the other 50¢ of course that went to the fund was never their money in the first place.

Now, after the deal was made, the commission then decided it would strike the whole thing in regulation. So it put it in regulation and it's been in regulation for a considerable period of time. CRTC regulations have the force of law.

So to come back to your question, what is the right solution in the longer term, it is to insist that people respect their regulatory obligations and that they respect the law. And if they do that, then these kinds of up and down crises of people pretending that somehow or other they can withdraw their money when they are in fact obligated to put it in, will go away." - Mr. Richard Stursberg (Executive Vice-President, Television (English), Canadian Broadcasting Corporation)

Sur le rôle du FTC/CTF (1025):

« Le fonds demeure donc le meilleur lieu d'arbitrage pour que l'ensemble des joueurs, qui participent à la création de notre industrie culturelle qui est la télévision, puissent faire valoir leur intérêt. À cet égard, c'est extrêmement important qu'ils le demeurent parce que ces arbitrages, non seulement permettent l'essor d'une production indépendante très forte qui garantit une diversité de création, mais cela permet la diversité des genres. Le fonds contrôle également la diversité des genres. On s'assure d'avoir du documentaire, des émissions jeunesse. Le président le mentionnait tout à l'heure. Le fonds permet que toute notre télévision ne soit pas laissée à la simple loi de l'offre et de la demande. Il assure une réelle diversité dans la création canadienne, ce qui est, en ce qui me concerne, l'esprit et la lettre de la Loi sur la radiodiffusion.

Je termine simplement en soulignant que quand je regarde l'ensemble des nouvelles plateformes, des nouvelles opportunités - Radio-Canada est présent dans à peu près toutes ces plates-formes - c'est un enjeu réel. L'esprit et la lettre de la Loi sur la radiodiffusion actuelle nous permettent de trouver des solutions en maintenant un secteur de production indépendant, un service public fort et des diffuseurs privés forts. C'est donc avec l'ensemble des partenaires qu'on va trouver une solution et le fonds possède ces mécanismes. » - Sylvain Lafrance, vp exécutif des services français SRC

Sur l'affirmation de Québécor qu'elle subventionne le diffuseur public (1025):

« (...) l'argument utilisé par Québécor sur le fait que Québécor finance Radio-Canada est un argument faux à tout point de vue.

Premièrement, l'argent va aux producteurs indépendants; deuxièmement Québécor reçoit plus du fonds qu'il n'y met. Donc, il ne finance personne que lui-même. Il a mis 15 millions de dollars au fonds et il a reçu 18 millions de dollars, dans la dernière année. Ainsi, Québécor n'a financé ni Radio-Canada, ni aucun autre joueur. Pour nous, il fallait absolument corriger cette impression.

Quand on regarde l'arithmétique du fonds, il y a environ 100 millions de dollars versés par les services publics et environ 96 millions de dollars qui retournent aux services publics. Donc, les privés ne financent pas le système public avec cela. Ce n'est pas vrai. Cependant, on a créé une instance d'arbitrage central pour que les règles du jeu soient connues de tout le monde. » - Sylvain Lafrance, vp exécutif des services français SRC

On Shaw's complaint that they have no voice to the chapter (1044-45):

Mr. Jim Abbott: The difficulty, as I understood the public utterances by Shaw, is that they have not been part of that discussion. And if I understand what you're saying here today, you think it would be useful for Shaw, Vidéotron, and other people to be more engaged, in the future, in the programming.

Mr. Robert Rabinovitch: Well, I'm going to say something, and I'm going to ask Richard, because he's been involved with the fund for so many years.

I categorically deny and disagree with Shaw's statement that they have not been involved. They sit at the table with the CTF. They discuss these issues. They push for their positions. It is not accurate to say that they have not been involved.

Mr. Richard Stursberg: I would just say that I was the chairman of the fund for four years. I believe I was the longest serving chairman of the board in the history of the fund, and survived.

The way it stands now is that there are four seats on the board for the cable companies and satellite companies. Indeed, when I was the chair of the fund I was the president of the Canadian Cable Television Association. Throughout the history of the fund, until very recently, in most cases the board was, in fact, chaired by somebody from the cable industry. The Shaws themselves have had a representative on the fund board since at least 2000, as far as I recall.

Over the course of the years - this is really to the issue that both Sylvain and Bob have been talking about concerning the capacity of the fund to be able to deal with problems and adjust as it goes along, the conversation we're having now is a conversation about some issues that are important issues - the fund has been through terrible crises in the past. While I was the chair of the fund, the previous year they'd run into a kind of terrible problem where there had been a gigantic $30 million shortfall in financing. The fund had really fallen to pieces. There was enormous controversy about the fact that the way in which some parts of the money was allocated was on the basis of really a kind of first come, first served. It was unclear what the cultural objectives of it were.

The fund board members, including the cable companies and the independent producers and the broadcasters and the CBC all came together at the level of the board and radically restructured the way in which it did its business. We put in place the rules that are now the distinctiveness rules to make sure the financing only goes to programs that are distinctively Canadian. We restructured the arrangements between the different pieces of money to more or less make a market in the funds to try to guarantee the money would go to those programs that were most likely to be successful.

A couple of years ago there was a lot of controversy surrounding the fund and its structure because at that time there were two boards and two administrations and people were very worried about governance issues and conflict issues and this and that. What the fund has done over the last little while is it has in fact resolved those matters. There is now one board. There is now one administration. There are very tough conflict guidelines. As far as I know, the Shaws were involved in all of those conversations. The cable industry was involved in all the conversations dating back to the ones that I described. As far as I know, they agreed unanimously to all of the changes that have been made, so what's been going on over the course of the life of the fund, which is now really 10 years old, is that they have on at least two occasions been able to make radical improvements in the way of doing business, and the cable industry was an important participant in that and participated enthusiastically was an important contributor to the solutions that were found."

On the need to deregulate (1054-55):

Mr. Ed Fast (MP Abbotsford, CPC): Dr. Rabinovitch, I was pleased to hear you encourage us to look at the history of the CTF. I believe Mr. Stursberg did an excellent job of doing that. Unfortunately, the message isn't getting out there. Historically, what happened is the cable companies received a benefit, and that was less regulation on their subscriber fees. In return, they agreed to support the Canadian independent production industry, which benefits all Canadians and allows us to view in public broadcasting a mere image of ourselves as a society.

In looking at the history, we also look at a history of a regulatory framework that was created by previous governments, and as long as nobody challenged the circulars or the regulations, we didn't have a problem. Today, somebody's challenging that framework. There are certainly suggestions that the circulars that were issued are perhaps not legally enforceable. Some in the industry, although I might disagree with them, are suggesting that even the regulations might not be enforceable due to the fact that they believe it's taxation, not simply fees.

Perhaps I could have you comment on something along the lines of what Mr. Masse raised. Again, we don't want to over-regulate the industry, but when we have these threats to funding agreements that were entered into in good faith, the challenges that places on the CBC, as well as others who depend on this funding for their livelihood, are many.

Mr. Robert Rabinovitch (CBC President): I don't disagree in terms of "less regulation is better" as the philosophy. I think there have been a lot of moves in that direction. This was not a deal that was regulated. The regulations were post facto. This was a deal that was arrived at by the industry in discussion with the regulator, offered up by the industry in order to get a particular benefit for themselves. Also, it was to recognize the fact that they are part of the broadcasting system. Remember, it was relatively close to the time after the act had just been redone, and the cable companies are supposedly, and we believe they should be, an integral part of the broadcasting system.

An essential element of the broadcasting system is the development of distinctive Canadian programming, and not just to have rebroadcasts of American content. This was seen, I think, by those in the cable industry as a fair way for them to make a fair contribution to the development of Canadian content. At the same time, they did very well for themselves. They protected and increased what they received three years earlier, but it doesn't fall under the usual discussions of regulation, in that it wasn't imposed by regulation. It was confirmed by regulation. The deal was between willing partners."