THE OTHER END OF THE TUBE

A TALK GIVEN TO THE GOVERNMENT COMPUTER CONFERENCE
OTTAWA. SEPTEMBER 11, 1979

There is a story of the old farmer who was being encouraged by his son to go back to school to learn some new agricultural techniques. The farmer replied that it would be a waste of time as he already wasn't farming half as well as he knew how.

There has been much written about the Wired City and the future of many information services in offices and homes. As a matter of fact I have been one of the proponents of this concept since the days of the Telecommunications Conference in 1971. I am still an enthusiast, but want to balance the picture with a hard-nosed look at reality.

Like the old farmer we are close to being flooded with information. Any use of broadband communications networks to place yet more information before businessmen or homemakers must be preceded by a sound analysis of what is really needed as defined by what people will pay for.

The GAMMA Group at McGill had noted that we have been ignoring the demand side of the information equation. To quote their report of March 31st, 1979 (The Information Society: The Issue and the Choices),"Much weaker than technology push, demand -pull seems to be following rather than leading. There is as much evidence of information overload as information thirst. The OECD countries seem to have an overabundance of certain forms of information."

They go on to say: "The logic of stages of development is leading the industrial economies to demand more information because, in a sense, they have run out of things to consume."

The GAMMA Group observes further that "Many of the information-intensive consumer goods on the market are either overt toys (video games, etc.) or disguised toys, stereo-sets, multi-channel TV, home terminals, etc.)."

It is time that we looked at this process from the consumer's point of view - a view from the other end of the tube.

SOME FUNDAMENTAL CONSIDERATIONS

1. THE BUSINESSMAN'S NEED FOR INFORMATION

There is an assumption that better information leads to better decisions. Obviously, no information can lead to very bad decisions. E.g. those based on pure guesswork. However, it is wrong to assume that even with perfect knowledge of a situation good decisions would always be made. What is needed by the businessman is not necessarily more information, and particularly not more information in real time, but rather better analytical and modelling techniques to enable the business person to assess limited information and make logical projections.

If I were proposing a use for two-way communications for business, my inclination would be to provide courses on statistical analysis, simulation techniques, decision making aids and other such factors. This should precede any new flood of information.

It would surprise most non-business people to realize how few decisions of importance are made in real time. Trivial decisions of course are made by the dozen each day. But major decisions are very unlikely to be made on the basis of the type of information that can be provided on a TV tube.

Of course there are exceptions. Stock purchases for short term speculation may be made on the basis of real time information. But most serious investors make their decisions on the basis of comprehensive financial information and analysis.

As I am in the communications business I have a TV set in my office. Vancouver Cablevision provides a comprehensive service of broadcast news, weather information and other items, and yet even with the convenience of a remote control device on my desk I rarely use the TV set for this type of real time information. It is this reality that concerns me most about the glowing predictions about how much such an information delivery system would really be used.

Certainly few businessmen have time to passively review even such information as is provided by the Dow Jones press service. If one were to be able to selectively retrieve information there might be a greater use of such a system. However, after nearly twenty-five years in the computer business, during most of which time it would have been possible for businessmen to have on-line terminals for a variety of information in their offices, there has been little use of this process. Frankly, most businessmen do not have the time to sit in front of a keyboard/CRT and peck away to retrieve information.

I have experimented with information retrieval techniques ranging from the New York Times data bank through Infomart. All of these are useful and have their place. But certainly it is not in the businessman's office. It is more likely to be in his research library.

It would of course be shortchanging the technology to write it off on the basis of standard information retrieval on general subjects. Other applications such as electronic mail could in fact provide a real boon to business. Again, however, to be realistic we should bear in mind that forms of electronic mail are already available. Telex or TWX provide very efficient means of distributing information. It is surprising to me that these devices are not more widely used considering the length of time they have been in service.

Most businessmen find it is very frustrating to call someone, find out they are out, leave a message, get a call back at a time when the originator is in a meeting or otherwise unavailable, and then have to repeat the whole process. Any device that would allow a message to be sent, read at the leisure of the recipient and then allow a written reply to be sent would be helpful.

We should be aware, however, that for this type of information substitute devices are available. The increasing use of telephone recording devices is one answer. Such store and forward methods of handling business correspondence will likely be offered by the Telcos in the years to come as a standard telephone feature.

The use of a Telidon-like device for computer assisted meetings is another often-touted use of broadband communications networks. Whatever happened to Picturephone? Again, I have experimented with conference calls which I generally find very effective, and also with televised conferencing. My experience in the latter was limited, but frankly I am not sure it added a great deal to the information exchange. I found the more effective way was to use a telecopier to distribute information in advance of a conference call.

Does this mean that there are virtually no office applications for the Wired City? Not at all. However, we should be realistic about doing adequate market research on what the needs really are. I expect that some of these needs would be:

• accurate and up-to-date transportation scheduling, e.g. delayed plane flights

• useful weather information, particularly for international weather where flights might be delayed.

• better methods of confirmation for travel booking

• in-the-home shopping (more of this when we discuss the consumer need for information)

• access to company files (a real headache for the businessman, although not one easily solved without a great deal of attention to proper indexing and information retrieval techniques)

• paid work at home (with computerized information banks there is no particular reason why some work could not be done at home, e.g. in the cable television business we employee a number of people who answer phones from clients to take work orders, check on billing problems, etc. There is no reason that a switchboard could not relay such calls to a person in their home)

There are therefore a number of imaginative uses of broadband communications networks for offices, but if the concern is the saleability of universal pay-as-you-go data then I would have to conclude that we may be pushing a real time medium for an unreal world - the demand has yet to be clearly established.

2. TERMINAL IN THE HOME

This is the exciting market that everyone predicted would sweep the industrialized nations in the late Seventies. In fact, that is exactly the prediction I gave at a talk to the OECD in Paris in September of 1974. Five year later there is some experimentation, but again we are faced with technology leading the desires of the consumer.

There is a rather deep concern that one could express about how many more hours industry should encourage the consumer to sit in front of the TV set. We are already concerned about lack of healthy exercise of both the mind and the body that comes from too many hours in front of the tube.

However, as a businessman I take the view that the industry should provide the public with what it wants and hence will pay for. In 1973 Paul Baron in an article in "THE FUTURIST" predicted that the major in-the-home use of a television set beyond regular broadcasting would be plays and movies from a video library. With this I am in entire agreement. It may sound crass, but I have yet to see a serious limitation to the amount of entertainment that people seem to be able to absorb via a television set.

Our own experience with pay television in the United States indicates that there is a real market for this type of operation. I have found myself, even without the benefit of pay television in Canada, that I can simulate this experience by video taping movies, sports events or cultural activities presented by the networks at inconvenient times. This time delayed form of

entertainment is a great boon, particularly when one lives on the West Coast and realizes that the world still operates on Eastern Standard Time.

Leaving aside this acknowledged huge market for entertainment, what other in-the-home applications would really be saleable. In the early Seventies I predicted that the most likely candidates were:

• in-the-home education

• in-the-home shopping.

2.1 EDUCATION

Rather than repeat the advantages which are well covered in the literature, I would like to raise the question of why this seemingly useful process has not been more successful. I do not want to imply that there are not success stories. While I was Chairman of the Board of Governors at Carlton University in Ottawa, the University undertook a very imaginative experiment with both cable companies to provide in-the-home credit courses. My understanding is that this has been well received and I sincerely hope that more of this can be done.

However, I noted an interesting piece in the Vancouver Sun on August 2 8th which read: "Faculty members at the College of New Caledonian in Prince George are up in arms because they fear their jobs may be up in the air. That's because beginning next week televised courses will be bounced from the B.C. Institute of Technology in Burnaby off a satellite called Anik B into six colleges around B.C. and the Yukon."

There is some reluctance on the part of some educators to expose themselves to the competition that comes from having the best lecturers present pre-taped presentations which can then be broadcast over an entire country.

Even assuming that this can be overcome and good material can be created, (and this requires more than simply taping a lecture), there is a question of economics and marketing. There is no doubt in my mind that the need is there. Whether for vocational or avocational reasons people in all walks of life will want to have continuing updates of their interests and skills. What has held back the development to date in my opinion is that it is not sufficiently attractive for the private entrepreneur to get into this field. Some very interesting experiments have been run and some serious proposals made, but the risk is still high that people will pay enough to make this a financially viable operation without government subsidy.

One interesting proposal in the United States was to find a forced market by concentrating only in the retraining of doctors, accountants, nurses, etc. who are required by the state governments to take refresher courses. I looked at this operation but decided that a better way to handle it would be on a lending library basis of video tapes or video discs. I recall the famous 'flying' broadcast experiments of the 1950's where planes were put in the air to broadcast in-the-home or in-the-school educational programmes. The process in the United States failed because it was too difficult to schedule many people in different locations to look at the same programme at the same time. The lending library operation of video tapes is, in my opinion, in the long run a better solution than the use of satellites.

However, I still feel that there is a market here which could be developed by the right entrepreneurial spirit.

2.2 TELESHOPPING

I remember having some discussions with representatives of the Eaton’s catalogue operation to try to convince them that in-the-home catalogue shopping via TV would be much more effective than the printed catalogue. I assume that by that time they were too far in the red to consider this seriously.

The great advantage to the communication, of course, is that the process is paid for by the stores rather than the consumer, and hence the economics are quite clear. The stores see the advantage of having the ability to buy tied closely to the sales pitch. If the sales pitch can be selected by the consumer, i.e. used by the consumer the way he would use a catalogue or even the Yellow Pages, then the results could be quite dramatic.

In these days of gasoline shortages it would certainly be more efficient to have a well-developed delivery system throughout the city, rather than having every housewife drive to a shopping centre. I predicted a real market for this some years ago and I still believe this is a most exciting area.

2.3 IN-THE-HOME INFORMATION

There will certainly be a market for encyclopedic information in the home for students doing essays or other casual browsing. However, I have always cautioned that most people have an encyclopedia in their homes and yet access it at the most 2-3 times a month.

I have had some opportunity to experiment with Prestel in the United Kingdom. With all due respect to that system and its look-alikes, it is a bore. The information provided has not been well researched and after a short period of working with poor response time and the almost useless information, I concluded this was a good example of people developing the technology while ignoring the marketplace.

Again, I believe there is a market for such things as:

• up-to-date sports scores

• booking of events such as plays, sports, movies, etc.

• restaurant selection and booking

• travel information and booking

It should be noted that many of these applications require some form of in-the-home printer as a confirmation of bookings made. This is an area which should be investigated.

The Hickling-Johnston critique published in February 1979 of the Telidon market noted that for all of the above, and in fact for all the proposed uses of Telidon, there are readily available alternatives. They acknowledged, however, that there is an almost insatiable desire for convenience items and therefore advanced in-the-home devices are likely saleable in the long run.

The Hickling-Johnston report re-emphasizes however that "serviceware is what the customer will pay for." They point out that there will be increased growth and expenditures on recreation, entertainment, education and culture. This may be at two times the growth rate of the Gross National Product. Certainly the market is there.

WHY HAS THIS MARKET NOT BEEN DEVELOPED?

I have expressed my enthusiasm for this market despite my cautions about realistic market analysis. it is not the lack of a market that has held back development. It is the current incredible jurisdictional scene in Canada.

The Department of Communications has been imaginative in promoting the technology as demonstrated by Telidon. However, it is not the technology that needs the development. What is critically needed is a totally new approach to telecommunications in Canada.

The cable industry, which has the capability of delivering all kinds of services to homes and offices in most of the major populated areas of the country, has been constrained from doing anything imaginative or innovative in all these fields. The Canadian Radio-television and Telecommunications Commission has for many years deliberately discouraged innovation by the cable companies on the grounds that this might hurt the over-the-air broadcasters, might not contribute to Canadian culture or whatever. Not only has the cable industry been constrained from offering clearly desired services such as Pay Television, but has similarly been hamstrung in its efforts to bring to the public such new services as have been outlined above.

As a result the lead that Canada had in cable television has now been eroded by the United States and other countries where essentially the regulations have been lifted and companies are free to innovate and be responsive to the desires of their clients.

Frankly, I believe the CRTC is trying to protect the broadcasters who are, as part of a mature industry, no longer in need of protection. The cable companies will still undertake to carry in preferred channel locations whatever signals the broadcast industry wishes to transmit. Beyond this requirement which is in return for obtaining licenses to wire areas, the cable industry should be totally freed of regulation and should be allowed to test the market with new products in any way it wishes.

I believe that Canadians are sick and tired of regulatory bodies trying to dictate what Canadians want. Canadians know what Canadians want and will demonstrate this by paying for it. The restrictions placed on cable companies in Canada are both unwarranted and totally unnecessary. I hope the elected representatives both federally and provincially will come to realise this and be responsive once more to the electorate.

SUMMARY

I have tried to look at the situation from the other end of the tube. As a supplier in the communications industry this is the most important thing I can do. It is high time that governments do the same.

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THE THIRD PHASE

A FORECAST OF THE FUTURE OF THE CABLE INDUSTRY
PUBLISHED IN ‘CABLE COMMUNICATIONS’ IN 1980

It is easy to predict that the cable industry is on the edge of a period of substantial growth. The question is: which edge?

It is now reasonably clear that the cable industry is entering its third phase of development. Earlier phases were:

1. Start-up - during the fifties and early sixties the main concentration of cable companies was on gaining credibility. The concept itself needed to be sold to the public and to be understood by governments at various levels.

2. Expansion - during the late sixties and early seventies the industry in Canada expanded to cover most major metropolitan areas and gained a very high level of public acceptance. The main service offered, however, continued to be, essentially, improved video signals. The success of this phase meant that without new products there could be little revenue expansion in Canada for the 1980's and beyond.

3. The Broadband Network - the phase we are now entering is one in which the industry will offer a wide range of services to be marketed to our well established subscriber base. The potential of this phase will be the arrival of the long predicted Wired City, making full use of the broadband capabilities that the cable companies alone provide to individual homes.

The transition to this new phase, however, will not be easy. Competition from the telephone companies and others will be keen. Despite the leading edge thinking of the Department of Communications and other government bodies, regulatory legislation may well lag the capabilities of the industry to realize its full potential.

Most important, however, the cable industry leaders will have to change their approach from being passive carriers of other people's signals to being entrepreneurial retailers of a wide variety of services. This will require continued meaningful discussions with governments at all levels to ensure that the public is protected where it should be, i.e. in the area of rates and quality of service for what may now be considered our basic service. However, the industry must ensure that the government does not feel it could, or should, regulate all the other innovative services that could be provided by the cable companies or other suppliers of services on cable.

The current reliance of the cable companies on pay television as the main thrust of the 1980's may be misplaced. I view pay TV as being only one of a number of exciting opportunities.

The challenge to our industry will be to define a new and comprehensive role as a national, and indeed international, retailer of broadband services to offices and homes.

Some specific predictions for 1980 would include:

• the practical realities of communications' technology will finally cause a breakthrough in the pay TV bottleneck in Canada.

• if the federal government does not keep to its announced schedule of licensing pay TV in Canada by December 1st, 1980, the provinces will move in aggressively to ensure that this desired new service will be available to their provincial constituents.

• the Pay Television Network consortium of the cable companies will be the chosen vehicle for pay television in Canada, and the broadcasters and film producers in Canada will accept the invitation to join in this national effort.

• during the early part of the eighties, the larger MSOs will continue to expand in the United States to fill the revenue gap until a freer regulatory atmosphere is established in Canada. This should be welcomed by all levels of government as it is providing a new form of export from Canada to the United States and elsewhere.

• the regulation of the cable industry will partially move to the provinces during 1980 in advance of a new Broadcast Act being put into place. I doubt that a new Act will be passed during the year despite the best efforts of the federal government.

Meeting the challenge of the eighties rests with the industry. It is too easy to blame regulators or others for lack of progress. The industry must be ready to negotiate with government the legitimate expectations of the government from industry and get acceptance of an unregulated approach for anything beyond these.

The third phase of the cable industry promises to be an exciting one.

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THE UNWIRED CITY

A paper in 1979 looking forward to the 1980’s and 90’s when there would be a mixture of the wired and unwired worlds –
an interesting prediction given my later involvement in wireless telephony.

The Wired City has been talked about for years. The concept is being overtaken by events. The 1980's and 90's will see exciting new advances in both the wired and unwired world. Cable communications will play a major role in this new Multi Media Revolution.

I know the topic of this Session was supposed to be the Wired City, but many of the most exciting happenings in the communications field these days are in the wireless world.

As I will discuss, this does not mean that coaxial cable should be coiled up on the floor and forgotten. Far from it. But we are going through another major change in the communications field which can be as dramatic as the change from the old copper wires of the early telegraph system to Marconi's first demonstration of wireless telegraphy.

At the very time the cable companies and the telcos are trying to position themselves as to who should provide what wired services to the home, the whole technology is moving to even more potentially exciting developments.

My own company, Premier Communications Limited, recently recognised this change by altering its name from Premier Cablevision Limited, a name which I felt was unduly restrictive. The communications industry should be looked at from the broadest possible perspective, and should include all the many new and old methods for transmitting information between or among people and organisations.

THE MULTI MEDIA REVOLUTION

While this term is not as catchy as the Wired City, it is more descriptive of what is happening. First, the new communications revolution is not restricted to cities. Greater attention is being paid every day to reaching rural or sparsely inhabited areas in Canada. There is also a growing realisation of the power of new communications media for developing countries on a world-wide basis. So the 'City' part of the Wired City is no longer an adequate description.

Secondly, the word 'Wired' is also less than an adequate term. The telcos and the cable companies are in danger of being hobbled by their own wires if they do not realise that people everywhere are making new choices about how they obtain entertainment, communications and information services. In addition to the traditional methods such as print media, over-the-air or cable television and standard telephone service, one only has to look at the recent revolution in over-the-air services to realise that the term 'Wired City' no longer describes the state-of-the-art.

WIRELESS VIDEO

The most obvious component of this revolution is of course direct satellite to home transmission. With several hundred illegal earth stations operating in Canada at the present time, it is becoming increasingly obvious that neither broadcasters, cable companies nor telcos can in any way restrict what people will watch. Nor should they.

If cable companies are going to survive as video carriers they will have to emphasise that cable is the best means of moving and bending signals around urban areas. Secondly, they will have to become innovative programmers providing a range of services that will only be available over cable. But more of that later.

The availability of satellite transmission has led to some unique approaches for in-the-home video communications. For example, Subscription Television (STV) is one way of providing over-the-air pay television to subscribers. A movie package is received from a satellite and broadcast on the UHF frequency in a scrambled mode. A de-scrambler is provided to the subscriber for a monthly charge and he or she can then view the desired entertainment.

Another method of over-the-air video is Multipoint Distribution Service (MDS). Here the entertainment package is again received from satellite, relayed to an omni-directional microwave broadcaster who as a common carrier then broadcasts the signal in a limited, e.g. 30-50 km, area. The subscriber needs only an addition to his existing television antenna and a down converter to translate the signal into a regular TV video signal. This approach is proving particularly popular in the United States where many good off-air signals are already available, and cabling is therefore an expensive approach if only pay television is desired as an additional service.

WIRELESS AUDIO

One only has to look at the explosive growth in CB radio to realise that wireless communication is increasing in popularity. It is interesting to note that at the moment the CB approach is mostly restricted to car radios, but a new use of cable might be in-the-home CB communications, as suggested by Dr. Joseph Halina of the Cable Telecommunications Research Institute. This approach would use a two-way audio channel allowing people in their homes to communicate with others who share similar interests.

Another growing over-the-air phenomenon is the use of mobile telephones, paging devices or other limited distance wireless communications approaches.

In summary, there are many approaches to delivering both video and audio signals over-the-air starting with the traditional broadcasting approach and continuing with the innovative approaches noted above.

However, even further alternatives now exist.

WIRELESS ENTERTAINMENT

While the cable companies and others are fighting for pay television rights, video tape recorders and video discs are already providing an interesting alternative to uncensored and 'non-commercial' in-the-home entertainment. The subscriber rents or buys the appropriate disc or tape and the only wires involved are those bringing power to the still somewhat expensive recorder and, of the course, the TV set.

THE UNWIRES

Although the difference may be semantic, there are other means of carrying signals that are not 'wires' in the usual sense.

There are few who do not believe that fibre optics or some variant thereof will ultimately replace coaxial cable as being the best means for relaying video or other wide bandwidth signals. Fibre optics is not yet the perfect answer for extensive video transmission over long distances. There are still tests being run in areas such as the proper sheathing of fibres, e.g. they have a tendency to shatter under certain conditions. However, these problems will be solved as there is the added incentive of an impending world copper shortage in the decades to come.

Wave guides and other means of relaying signals may also play an important role for certain types of applications.

One might argue that fibre optics and wave guides are not really wires at all.

THE WIRELESS WORLD

All of this is enough to remind us that the communications companies of the 1980's and 90's will have to be broadminded as well as broadbanded about what is really most sensibly handled by new wired and unwired techniques. Now we should look at where cable will play a major role in the Multi Media Revolution.

THE NEW ROLE OF CABLE

I have emphasised that coaxial cable will play a role for many years to come. Direct satellite transmission to homes will not likely be attractive in urban areas. Even though TVRO's will get less expensive and smaller they are not a universal answer. After years of gradually getting rid of unsightly antennas from roof tops, I doubt that many urbanites will want to clutter up their roofs or gardens with one metre bird baths. Also, unless the receivers are agile or omnidirectional, they will not be able to look at all the satellites carrying all the desired signals.

For years to come the preferred approach will be to have large dishes, less subject to interference from storms or other atmospheric disturbances, which will receive the signals and relay these through the cables to the homes.

Direct satellite signals are also subject to blockage by buildings or other obstructions.

Finally, the electromagnetic spectrum is getting very crowded. Fortunately, the high channel capacity of a coaxial cable or a fibre optic cable allows many signals to be carried with no appreciable external radiation. In fact it may be that the concept of over-the-air broadcasting in urban areas will disappear entirely. For example, in an area such as Vancouver or Victoria where cable has over 90% penetration, it would be more sensible for the broadcasters to simply supply their signal directly to the cable headend and use the broadcast approach only for remote areas reached by lower power repeaters or satellite.

THE WIRED WORLD IN THE EIGHTIES

In addition to the technical reasons for believing cable will be the best approach for years to come, I mentioned that cable companies will have to become more active programmers, providing unique services not available any other way.

The basic concept will be that, in return for a license to wire an area, the cable company will provide for a basic fee a series of basic services. These would include the transmission of Canadian broadcast signals and a certain number of public service signals. There might still be some local US channels provided, but the priority would continue to go to Canadian broadcast signals.

Beyond that there will be multiple tiers of service for which the customer will pay or not as his tastes dictate. This is already becoming common in the United States where several levels of Pay Cable are available in many urban centres. Examples of such services would be first run movie channels, such as provided by Home Box Office, Showtime or others; sports channels, such as Madison Square Gardens; special language channels, such as Galavision appealing to Spanish speaking groups, etc.

At the present time this type of charging for tiered services is not allowed in Canada, although the Federal Government is holding Hearings this year on the possibility of allowing a primitive form of Pay Television in this country. (In the meantime, we should remember that Northern Canadians who are illegally watching the growing number of such signals from American satellites are really the advantaged Canadians when it comes to television viewing - a strange anomaly considering that the urban TV viewers were for many years the privileged group.)

BEYOND PAY CABLE

The cable companies can however provide a range of services which are much more imaginative. For example:

CABLE MAG. This would be true narrowcasting. In the same way that people now subscribe to hard copy magazines in their particular areas of interest, the cable companies could provide specialised programming on boating, bridge, gardening or any other subject in which they believe a group of people would be interested. Those wanting that information would pay a subscription fee as they would for a magazine. In addition, advertisers who want to reach these specialised markets could support the process by placing their advertising on these channels. The advertiser would benefit by knowing that the viewers were specifically interested in the products offered. The viewer would really appreciate the relevant advertising as opposed to the lowest common denominator advertising and programming now received on the regular networks.

There is no doubt that the traditional over-the-air broadcasters will object to this, but they will still be able to offer material and advertising of broad general interest.

Cable Mag is one reason that we believe the 50-100 channels so often talked about will become a necessity in the years to come.

CABLE AUDIO. A unique suggestion by James Martin in "Future Development in Telecommunications" is the use of one video channel to provide perhaps 100 channels of high fidelity stereo music. Each channel could be dedicated to a particular type of music, or indeed a particular composer, e.g. one could have a Beethoven channel, a Scott Joplin channel, or whatever. It might even be possible for people to place requests for music to be played at or near a specific time. As the price of vinyl for records escalates with the cost of oil, cable could provide a limitless substitute for records in the home.

CABLE GAMES. This term is often taken to mean games that can be attached to your TV set. I believe a broader definition would be using cable for in-the-home betting on real or computer simulated sporting or other events. In-the-home lotteries or bingo games would be quite possible. While there may be some moral distaste to such an approach, we should remember that such gambling has already been condoned by governments in nearly every part of the world. The cable would only make the whole process more efficient and convenient. One can also argue that the morality lies in the use of the monies so raised rather than in the process. That is a more complex question.

OTHER CABLE SERVICES

There has been so much talk about other possible cable services that I have deliberately avoided them in this discussion. I have been delivering talks and Papers for at least eight years on the advantages of in-the-home education, teleshopping, cable-monitored security services, interactive polling, etc. Undoubtedly these will form part of the Multi Media Revolution that will be carried on cable.

The fact that so many of these services have been so long in coming is partly the fault of our industry which has just not been aggressive enough in making a case as to why these are both desired and feasible. However, some of the blame must also go to the regulatory authorities who seem to be so fearful that they might upset the traditional broadcasters by fragmenting audiences that they prevent anything from happening.

I believe that the greatest contribution cable companies can make in the future will be in providing an enormous variety of services from which the public can choose and for which the public will pay according to their own desires. Surely this is the real challenge of the Multi Media Revolution.

As long as the regulators are afraid of what might happen in Canada if the communications companies are given freedom to" experiment, then nothing will happen. The problem is it is happening elsewhere and Canada is losing its lead as an innovator in the communications field.

HOW MANY WIRES

The telcos and some people in the Federal Government have been pushing the idea that a single wire run by one company is the answer. This I cannot accept.

First, I believe that there is more than enough potential for both the telcos and the cable companies in the years to come to absorb all their energies simply providing new services.

Secondly, their plants are so essentially different; the telcos providing a switched low capacity network and the cable companies providing a basically unswitched high capacity network, that they are really complementary in many ways. If they continue to bicker about who should do what, both could be upstaged by the new developments referred to earlier in this Paper.

Thirdly, I am fundamentally against the idea of having only one supplier of anything. Canada years ago decided it would not have just a single airline or a single railway or a single radio broadcasting system. I am sure that those of you in the computer field would also believe that your field has benefitted by not just having IBM.

I believe that the Canadian Radio-television and Telecommunications Commission now believes this. However, I have no concern either about direct competition between the two where practical, e.g. security systems.

I also have no objection to the telcos becoming programmers if their programming operations are kept at army's length. The cable companies should do the same. This is the same argument that I presented years ago when Bell wanted to enter the computer services industry. The concept was accepted by the Federal Government. It made sense then and I believe it makes sense now. The cable companies welcome competition. Even now they are not monopolies as there is all the over-the-air competition I have talked about in this Paper.

Cable companies are the other local loop. While it may not make sense to have dozens of local loops servicing a home, I am firmly of the belief that we should not have just one.

I hope we put this single wire concept to bed once and for all and realise there will be and should be many paths into the home both over-the-air and through wires in the Multi Media Revolution in the 80's and beyond.

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A POLICY FOR THE CABLE INDUSTRY IN CANADA

DISCUSSION NOTES FOR THE HON. DAVID MACDONALD,
SECRETARY OF STATE AND MINISTER OF COMMUNICATIONS,
GOVERNMENT OF CANADA. SEPTEMBER, 1979.

OVERVIEW:

A simple approach may solve a complex problem. The regulatory system for the cable industry in Canada has become increasingly complex. Of more concern, it is becoming ever further removed from reality. The current situation is unresponsive to public desires and unfair to cable operators.

In an era of growing deregulation in North America, and re-privatization in the United Kingdom and in Canada, the communications industry seems headed for more Government inquiries and more regulation. If the policy of the present Government is to re-privatize and deregulate, then this approach should apply to the cable industry.

A POINT OF VIEW ON REGULATION:

We acknowledge that some regulation of the free market process is required to protect basic interests of the public.

However, the aim should be to obtain a reasonable consensus on what the basic public interest really is and then implement the minimum regulation to protect this interest. If the need for regulation of an area of an industry cannot be clearly demonstrated, the default option should always be no regulation.

OBSERVATIONS ON THE CURRENT CABLE SITUATION:

It was noted above that the current regulatory approach is causing the cable industry to be unresponsive to the desires of the public at large. The industry acknowledges its responsibility in return for its licenses to provide basic services to all its clients, including the carriage of Canadian broadcast signals and reasonable public access to a community channel. Beyond this, however, we believe that user selective services should be left to the free market process.

The unreality of the current regulatory situation is that it is unenforceable. For example, shortly some Canadians, e.g. those living along the U.S. border, will be able to receive the pay television signals they desire off air. Further, those in Northern communities are already receiving such signals via their own earth stations. Meanwhile, the majority of Canadians will be denied similar rights because the cable companies are not allowed to provide similar services to their subscribers.

The unfairness comes about because of the inequitable regulatory situation. Although cable companies are required to provide many social services such as community programming, organisations such as All-View can cream-skim the heart of our major cabled areas by providing pay television, while returning nothing in the way of social dividends.

A SUGGESTED NEW POLICY:

1. Assuming that one aim of the Government is to protect the broadcasting industry in Canada while ensuring the consumer receives good signals for Canadian broadcasts, we acknowledge that the Government should continue to regulate the channel allocations, quality and cost to the public of this basic service.

However, we believe there is no reason to go beyond this. We recommend the Government remove any restrictions for a three-year minimum period on other services that might be offered by the cable companies on a 'pay for use' basis. This would include:

• pay television

• security services

• information services

If at the end of the three-year period it appears that the public interest is not being served by this approach, then regulations could be introduced selectively.

2. We assume that a second aim of the Government is to promote a Canadian identity through improved Canadian film production. When this is attempted by regulations on Canadian content the results are often artificial and are certainly resented by the viewing public. A better approach would be to encourage companies in the communications field to buy Canadian productions from whatever sources are available or could be encouraged to start up.

We recommend that in return for deregulating pay television and other new cable services, the cable industry be required to buy and present Canadian programming content at a rate of 25cents per subscriber per month. However, this should not be viewed as a tax to fund Government film production. Rather it should be left to the cable industry to buy from commercial Canadian sources. This would be a positive approach rather than the negative approach of regulation.

3. The Government appears to have the aim of promoting the use of the Canadian satellite system. This is forcing an artificial solution on an industry which really does not need satellite time other than in select circumstances, e.g. transmission to the North, or coverage in real time of certain national or international events.

With the differences in time zones across the country, forcing satellite usage on cable companies for pay television or other uses is economically unrealistic.

We recommend that the Government free Telesat from the rate setting entanglements with TCTS. If Canadian channels are priced more along the lines of those in the United States, then industry would have an economic incentive to use them. As long as TCTS dictates that satellite channels must be priced so they will not impact their existing microwave networks, usage will be minimal.

CONCLUSION:

The Department of Communications has a significant opportunity to solve several lingering problems in the cable/ communications industry with the relatively simple solution outlined above.

The DOC has an opportunity to support the Government's position on deregulation and re-privatization.

Such a policy, with the possible exception of recommendation (3), would not require any extended examination by committees or commissions, as it could be viewed as experimental

We recommend that DOC implement such a policy as soon as possible.

Back to Section C Index or just read on

 

FIRESIDE CHAT

JANUARY, 1980

Hi, this is really in the form today, of a "fireside chat". You know I called Martin Truax a couple of days ago and suggested that I'd like to make another tape, just to let you get an idea of what's going on in the Company, and Martin said, "Well you cut the last two tapes in the studio atmosphere, why don't we come out to the house?" So, what's happened is that Al and Andrew and Jeff Franklin arrived here at the house first thing this morning and set this up in my own recreation room.

This is also the first chat that I have had with you as President of Premier Communications Limited. Now you may recall that I did mention some time ago that it seemed to make sense to me, to change the name of the Company from Premier Cable-vision to Premier Communications and that move was approved by the shareholders at the Annual Meeting on January 10th. Now the reason is very straight forward frankly, we're expanding into a lot of new areas these days and as Premier is not really a cable licensee, per se, then it was confusing to people to use the name 'cablevision' in the name of the Company. York has a cablevision license, Vancouver has a cablevision license, so does Borden, but Premier really does not. But far more important, we are moving into new areas that are really not directly related to the cablevision business. And I'll come back to a few of those in a moment. But let me first tell you what else happened at the Annual Meeting and at most Annual Meetings, not an awful lot of great excitement happens, but I did report on the first quarter results this year, that's for the quarter ending November 30th. And there we found that the Company was doing quite well, didn't really make an awful lot of forward progress over what happened in the corresponding year last year, but as I may have mentioned in some previous chats with you, the difficulty is that we're faced with constantly rising costs and very little opportunity to get rate increases. The rate increase we looked for in Vancouver was turned down, temporarily we hope, we decided that it didn't make much sense to go for a rate increase at this point in Victoria for a variety of reasons and we still don't know what is going to happen at Fraser. So for a lot of these reasons, we're finding that the revenue is staying fairly steady at the moment and the costs are going up. Well, so much for the financial side.

I said what I would like to do is just tell you a little bit about some of the new things that are happening within the Company. And one of the first things we announced, just a few days ago, is that we had completed the purchase of TV Week. Now we're only 50% partners in TV Week, but our belief is that this is going to be of a major benefit in the British Columbia area to our subscribers. TV Week is a very highly regarded publication which gives TV listings, and happens to give the best coverage of anyone of our channel 10 operations and our other special programming operations. Now, this publication covers about 125,000 subscribers at the moment in the Lower Mainland area and on Vancouver Island. And our hope is that we'll be able to expand their circulation a great deal, as a service partly to our customers. I have met now most of the people who are at the TV Week operation and they look like a great bunch of people to get along with. As a matter of fact, they had a very nice lunch for us the other day just to sort of welcome us as 50% partners in the operation. We thanked them very well for all this until we suddenly realized that of course, as partners, we were paying for half the lunch!

Well, that's only one thing that we've been taking a look at. Another thing is that we are trying to develop new services for our customer base and one of the things we are looking at that I commented on to the Annual Meeting, was the possibility of getting in to the direct mail business. You know what we do each month or every couple of months, is send out something to our subscribers that is simply an invoice.

Perhaps we could do more for them than that. We believe that we could provide a whole range of very high quality products that we could offer on a direct mail purchase basis to our subscribers. Thereby providing another new type of service. Now we'll be very sensitive to the fact that not all subscribers would want that kind of thing. They may not want more mail of that type, and if they don't want it, we won't send it to them. But we believe that if we do provide some things that are, perhaps related to the entertainment business, this would be helpful. Now these may be things such as video tape recorders or even TV sets for that matter. But we think there would be quite a variety of these kinds of products. So watch this space, you'll likely hear some more about that in the next while.

Now another thing that we are taking a look at is of course the expansion in the United States, of this over-the-air pay television business. And I just got back from a two or three day trip visiting the various installations we have there in San Francisco, Seattle and Portland and so on, and these are coming along very well. We've built up an excellent staff in these areas and our feeling is that this will be a very major part of our business in the years to come.

Now I want to emphasize one thing, I talked a lot about things that are not exactly in the cablevision business and of course that's why we changed the name of the Company, as I said earlier. But I don't want anyone to misinterpret that and think that for any reason we are de-emphasizing cable. As far as we're concerned, cable is the preferred means of getting signals into the home or into offices. And to demonstrate how much we believe in it, we just late last fall, put in an application to get cable licenses for a number of areas in the central/northern part of British Columbia. We established a company called Peace River Systems Limited and that covers areas such as Chetwynd, Mackenzie, Fort St. John, Dawson Creek and so on. And we believe that we can provide a very, very fine service to these people. We're not of course sure that we're going to get that license yet, but at least it indicates that we're continuing to expand the cable business in Canada.

We also are looking at the cable business in the United States. Now as you may recall, because we are partially owned by CBS, and they are a broadcaster, we can't directly own a cable company in the United States, at least not yet. But what we did do is like to make an investment in a company called Radiant TV, which operates in a small city called Camus, which is near Portland. And, we do have an option to buy 8 0% of the shares of that company, should we be allowed to get into the cablevision business directly in the United States.

Now, there is one other topic I did want to cover with you today and I am sure it's the one that is of most interest of all the things I've talked about so far. And that is the upcoming joint operation between the Rogers/CCL Group and Premier Cablevision, pardon me, Premier Communications. What is happening here is that the major shareholders of Premier, have agreed to sell their shares to what would really be Canadian Cablesystems Limited, which I'll just refer to as CCL. Now because the major shareholders have decided to do this does not mean it necessarily is going to happen, this still has to be approved by the C.R.T.C. and we just cannot predict at this point in time whether they are going to agree with this move or not. But we're very excited about the possibilities, because what this would do by putting together the two largest firms in Canada, is to make, not only one of the biggest firms in North America, but we believe, one of the best. We feel that over the next few years, we are going to have to be part of a very, very major cable communications operation in North America. We are, believe it or not, in a competitive business. To a degree we're competitors with the Telcos, the Bell Canada's, the B.C. Tel's, whatever. We're also, to a degree, in competition with any other form of entertainment, in the home or even in the form of movies, or whatever. So to compete logically in this sort of business, we have to be big, well financed and very well staffed. Now, the plans are, at this point in time, to put these two companies together financially, but Premier Communications will stay as a separate company and it will stay with its head office in Vancouver.

When we put the two companies together, Premier will take over the operations essentially for the central and western part of North America. Now the implication of the Premier people will be, that we will pick up responsibility for the CCL operations in Alberta, primarily in the Calgary area. We'll also pickup, because CBS will no longer be a shareholder at that point in time, the interest in some of the CCL cable operations in the United States, primarily in the Los Angeles area. Now, there will therefore be, not a great deal of change, other than just expansion, for the Premier people operating in the British Columbia area right now. I don't expect either that there will be a great change for our people in the United States, except that they will in fact be part of a much larger operation than they are right now. I don't expect either that there is going to be a great deal of change for our operations overseas in Ireland, because really that's unlikely to be altered in any way by putting the two companies together, except again, that is our hope to keep expanding in the overseas areas, in fact other than in Canada and the United States. However, there will be some changes implied in what I've already said, for some of our staff in the Toronto area. Now in the same way that Premier will pick up responsibility for the western part of the United States and Canada, CCL will pick up responsibility for the eastern part of the continent. And that means that our subsidiaries in the Toronto metropolitan area, will then become part of the CCL/Rogers Group. Now I mention this because we will be filing with the C.R.T.C. on or about February the 18th, and between now and then we will be having some discussions with some other organizations about the possibility of doing some further rationalization of the Toronto area. Now when I made a tape in Toronto on November 2nd, I did cover a bit of this with the Toronto staff and tried to point out to them that some more rationalization was going to be almost inevitable in that area. As you are all aware, the Toronto map really looks like a big jigsaw puzzle. Now some of this is going to happen whether we put Premier and CCL together or not. But it is a possibility that we may end up as well as integrating Premier operations with the CCL operations, doing some trading with some of the other organizations working in the Toronto area. And I want to address this in particular, because I didn't want anyone in the Toronto area to be the least bit concerned about this process.

Ted Rogers and I are very sensitive to the fact that what we will be doing, if indeed we have to do much in that area, will be to trade places not people, and we'll make every effort to make sure that people who want to stay with the CCL/Premier operation in the area are given the opportunity to do so, those who want to move with whatever territory may be traded with other organizations, would have that opportunity. We've set up a joint group with Ron Chaston from our organization and Bill Rogers from CCL, to take a look at some of the implications of all this, and we'll be reviewing these possible changes with you as time goes on.

I also want to emphasize that there is nothing imminent going to happen on this. There's no way the C.R.T.C. could make a decision on putting the two companies together much before the end of August. And even if part of that decision involves some additional rationalization of the Toronto area, nothing is going to happen on that for some time after the decision is rendered. So we'll have lots of time to sort out anything in that area that may be of concern to anyone.

Now let me shift back then to the very positive things that are going to happen as a result of putting these two companies together.

We believe that we can do some very exciting things that can only happen if the Company is a very, very big one and remember that the two companies together will make an organization that will be one of the biggest in North America, right up there with the top two or three companies of any part of the cable communications business. And we spent all last weekend and the we being Gordon Keeble and Harry Davis and Dave Liddell and myself with a lot of the people from the Rogers/CCL Group, just trying to figure out all the things that we could do in the way of new programming initiatives and new applications, and new engineering thrusts and so on. And, I can tell you that we came up with a longer list than we could implement if we were to put three or four companies together. So I do want to emphasize to you all, that we need all the people we can possibly get to make this happen. And we're very proud of the Premier staff that we have got here and we know that their going to play an integral role in the whole integration as the years progress. Now I do emphasize finally that of course this hasn't happened yet, its only been agreed to by the shareholders and we just don't know what the C.R.T.C. is going to think about this operation. It'll be a big decision for them to make. We expect the filing, as I mentioned, to take place about the middle of February, we expect a hearing, which will take place in Vancouver, to be held about the end of April or the first week of May. And it is our plan to simulcast that hearing with Toronto, so the people that want to make comments about the operation can do so in either city and be heard in the other.

Well, to sum all that up, we really expect that there is going to be a very, very exciting year ahead of us, and I'm going to keep in close touch with you all. I hope if you do have questions, or any concerns as we move through this process, that you won't hesitate to talk to your Manager about them and we'll see that we get answers to you as quickly as we can.

So, in the meantime, I hope you have a very fine 1980 and all the best wishes for the New Year.

Back to Section C Index or just read on

 

ANNUAL MEETING OF PREMIER CABLEVISION

JANUARY 10, 1980

It is a pleasure to outline some of the achievements of the past year and briefly discuss the fast moving events at Premier.

As this is my inaugural discussion with the shareholders, I should remind you that I was only here for five months of the year ended August 31st, 1979. Therefore much of the credit for what was basically a good year must go to the management team that has been in place throughout the entire period. New presidents always take some getting used to, but this management group as well as the Board and the staff have made the transition easy for me. This assistance from all sides has been much appreciated.

I mentioned that 1978/79 was basically a good year. Revenues climbed to an all time high of $36 million. The number of subscribers served by Premier increased by 4.4%. However, as predicted in last year's Annual Report, the net earnings for the year declined somewhat as we continued to have difficulty obtaining rate increases from the Canadian Radio-television and Telecommunications Commission that take into account our sharply rising costs.

While we will continue to press for a more logical and consistent approach to rate increases, the lack of increases will continue to negatively affect our earnings picture. An additional complexity is the increasing uncertainty about the rate regulation process. The CRTC has a new Chairman and there are a number of new appointees expected to the CRTC. However, even this may be of less significance because it now appears likely that rate regulation will move to the provinces.

It is this concern amongst others that has led the management into new ventures in Canada that are not rate regulated, and into the more entrepreneurial environment of the United States.

MULTI-POINT DISTRIBUTION SERVICE

Since May 1979 we have initiated a number of new operations on the West Coast of the United States in the over-the-air pay television industry. Two of these, CALSAT and Northwest Entertainment Network Inc., are joint ventures. More recently we have opened our own wholly owned operation in the San Francisco area.

Pay television is a competitive business in the United States but we believe that the over-the-air form of pay television known as MDS is an effective way of providing pay television to communities that either are not cabled, or where the cost of cable may be an expensive addition when only pay tv is desired or needed. These start-up operations have not yet made a positive contribution to earnings, and are not likely to have a significant effect during the 1979/80 fiscal year. However, as this service meets a definite need and is essentially free of regulation in the United States, we believe it will be a significant factor in the company's operations in the years to come.

SERVICING OUR SUBSCRIBERS

Other non-regulated areas we are investigating include providing services to our subscribers that do not directly involve cable. For example, we are concerned that our subscribers are not getting adequate information about the specialised programming we provide such as our Channel 10 community programming operation. This was one of the reasons we purchased a 50% interest in TV Week. This highly successful publication which serves the Lower Mainland and Vancouver Island in British Columbia will continue as a stand alone publication, but now the close cooperation with the Premier licensees should enable them to provide better programming information to our many subscribers. We believe we can in turn help TV Week by expanding their circulation.

A second type of service planned is the provision of high quality products to our subscribers. We are investigating a direct mail service to our subscribers, however, we are very sensitive to the subscribers' privacy and will ensure that no subscriber receives mailings that he or she does not wish.

We believe that through bulk buying of select merchandise, we can provide our subscribers with a most useful new service.

CABLE TELEVISION

These thrusts into non-regulated areas do not mean that Premier is de-emphasising its cable operation. Quite the contrary, we recently applied for the licenses to wire a number of north central B.C. communities including Fort St. John, Dawson Creek, Chetwynd, Mackenzie and other areas. The name of the proposed company is Peace River Systems Limited. The CRTC has not yet made a decision on which of several applicants will receive these licenses.

Secondly, we have taken an option to acquire shares of a new cable operation in the City of Camus in the State of Washington. We are providing debt financing in the amount of $800,000 U.S. and have an option until December 31st, 1994 through our Netherlands company to acquire 80% of the issued shares. There is precedent for this approach in FCC decision, although specific permission would have to be sought before the option could be exercised as long as we are still partially owned by CBS. The option could of course be sold should we continue to be constrained from direct entry into the cable television business in the United States by reason of the CBS position in Premier.

While these two initiatives in the cable field occurred after the end of the fiscal year, we of course did get approval during the last fiscal year for our 45% interest in Western Cablevision Limited who, along with its wholly owned subsidiary MSA Cablevision Limited, provides service to nearly 70,000 subscribers in New Westminster, Langley, Surrey, Abbotsford and Matsqui in British Columbia.

Our dedication to cable as a preferred means for delivering a variety of video and other signals to the home remains intact. This is particularly true in Canada where we hope that in the next 12 - 18 months we will get permission to proceed with pay television over cable.

A CHANGE OF NAME

We are proposing to the shareholders today that the name of the company be changed to Premier Communications Limited. This is a significant change for it recognises that Premier is becoming a more broadly based organisation with interests in a publishing business, direct mail and broadcast pay television -all forms of communications not involving cable. It was always confusing to the CRTC and others to call Premier a cablevision company when in fact it does not directly own any licenses for cable television. It is our subsidiaries who have licenses for individual areas, and it is these subsidiaries who are subject to CRTC or other regulations.

Premier is essentially a holding company for a variety of operations in the communications field, using the term communications in its broadest sense.

BID FOR PREMIER BY CCL

Of the many activities involving Premier over the last nine months none has drawn more attention than the proposal to put Premier and Canadian Cablesystems Limited together to form the largest cable communications operation in Canada, and one of the largest anywhere in the world.

I believe that the offer made to the major shareholders of Premier by CCL is at a fair and reasonable price. The approval for the transfer of ownership will be the subject of a Hearing by the CRTC around the end of April, 1980.

Management believes that such a joining of interests will be of significant benefit to the industry, the shareholders and of great importance to the subscribers.

The industry will be strengthened in much the way that the presence of an IBM or a Bell Telephone has respectively strengthened the computer and communications industries. The cable television industry needs a single strong presence that can provide financial, technical and programming leadership which can in turn be shared by other companies in the industry.

The present shareholders of Premier, we believe, will benefit by having the option of receiving a fair price for their shares or being part of a much larger operation which will be more diversified in its product lines and its geographic operations, and will benefit from the combining of the two management groups.

Finally, the subscriber will benefit through more variety in programming and better plant reliability and capability through the pooling of engineering talents. The subscriber should benefit through better price performance as the combined companies will be able to spread the expenses of engineering, share the risk of developing new applications and bring the benefits of bulk purchasing to help hold costs in line in the future.

For all these reasons the management of Premier will be working closely with the CCL management group to convince the CRTC that such a move will be a major step forward for all concerned.

SUMMARY

I expect that 1980 and beyond will be very exciting years of Premier and hopefully for the combined CCL/Premier group. There is always some concern by the staff in each organisation when two companies plan to get together. However, the greatest need in our industry is for more people to undertake the many new projects which the combined companies could now undertake. I am sure one of our challenges will be to find enough people to do everything that needs to be done.

I know I speak for the shareholders and the Board of Directors when I indicate how much we all appreciate the continued fine efforts by the Premier staff at all levels. For my part, my first nine months have been among the most interesting and challenging of any period I can remember. My prediction for 1980 is that the last nine months will, in retrospect, appear as a quiet prelude to a very exciting time.

Back to Section C Index or just read on

 

BROADBAND COMMUNICATIONS:
CANADA'S NEWEST RETAILER

A TALK GIVEN AT THE CIPS SEMINAR ON DATA COMMUNICATIONS
WINNIPEG, CANADA, APRIL 22ND, 1980

It is enough to make one seasick. Everyone is talking about waves of change sweeping over our society. A couple of years ago Charles P. Lecht wrote a book called The Waves of Change describing what was happening in the computer field. Now Alvin Toffler has come out with his new book, The Third Wave. In this book he talks about the electronic cottage, the crack up of the nation state and a variety of other cataclysms that will arise from the new electronic age we are entering. The book is filled with such stirring quotes as:

"The collision of wave fronts creates a raging ocean, full of clashing currents, eddies, and maelstroms which conceal a deeper, more important historic tide."

I sometimes wonder if many of these writers are not all wet. No one doubts that immense changes are coming, but more often in the form of a gentle swell than a true wave. The problem is the inertia of people's habits, wants and ways of thinking. Like the rocks on the shore these do not change rapidly in response to waves.

Perhaps Byron recognised this better than some of the modern populist writers when we wrote of the ocean:

"Time writes no wrinkle on thine azure brow
Such as creation's dawn beheld thou rollest now."

But changes are coming even though more slowly than the futurists have predicted. Nowhere will this be more evident than in the area of broadband communications.

THE BROADBAND WORLD

By broadband communications I mean the type of network that can accommodate one or more video signals of the 6MHz variety. I will leave to others a discussion of the future for networks under 100KHz - these being the ones with which you are most familiar in the data processing field. I will therefore be discussing mainly what I expect in cable communications linked to form networks by microwave or satellite transmission.

A NEW ROLE FOR BROADBAND COMMUNICATIONS

The cable industry, a major factor in the broadband communications world, is itself at the crossroads. Almost since its inception this industry has been viewed as an integral part of the broadcasting system. It is defined as "a broadcast undertaking" and hence is regulated by the CRTC.

However, the CRTC has also pushed the cable companies into a hybrid situation where they are to some extent producers as well as distributors of entertainment and information. The CRTC's insistence that cable companies become community programmers has led to this carrier/content integration. At the present time there are more cable community studios in Canada than all the other production TV studios combined.

The cable companies have now recognised that this implies a new role for them. The CRTC has assisted this recognition by stating that it does not intend to regulate non-broadcast functions such as in-the-home security services, as long as there is a clear separation of costs and such operations do not interfere with the licensed broadcast operations.

The cable companies therefore have the opportunity to become more than carriers and more than broadcasters. They can truly become the broadband retailers of the 1980's.

CANADA'S NEWEST RETAILER

Just as a large department store provides shelf space for goods produced by others, most now also produce their own name brands. It is in this sense that I describe the new cable companies as retailers.

Just as a department store offers a great variety of goods, so will the cable companies. What makes a department store viable is the wide choice of articles that it produces or assembles and the freedom of choice provided to the consumer. This choice is reflected in what the consumer chooses to pay for.

Before touching on a few of the new services which the cable companies could provide to the home or office user we should understand one of the fundamental requirements for using cable as an Electronic Boutique - this is the right to multi-tiers of pricing.

THE ENTERTAINMENT BOUTIQUE

The cable companies got their start retailing entertainment in the form of over-the-air broadcast services cycled through the cable. Now many broadcasters feel threatened by the possible audience fragmentation that could come if the cable companies are allowed to provide other forms of entertainment.

For three weeks in April a committee established by the CRTC has explored pay television. You may not recognise this as the committee is supposed to be exploring service to remote communities. However, much of the discussion has ranged around whether the cable companies would be allowed to charge a certain amount for the basic service and a second tier of charges for first run movies, sporting events not otherwise seen, musical specials, or other such entertainment fare.

There is a sense of unreality about many of the arguments being presented to the CRTC. The Hearing is not really a discussion about pay television. We have always had pay TV. The question is only whether the user should pay on a voluntary or involuntary basis or both.

When we watch a supposedly free television programme, we of course realize that we pay for this privilege every time we buy a good or service. The cost of advertising is built into all the products and services we buy. People everywhere pay this cost whether they watch and enjoy the programmes or not.

The very nature of this process means that the programming must appeal to the lowest common denominator so that the advertiser will get the broadest possible exposure. This has led to considerable dissatisfaction with currently available programming. The cable companies' proposal is to offer more specialized programming without commercials, for which people would pay or not as they choose and as their interests dictate.

In the United States there are now specialized channels that provide sporting events, cultural packages, foreign productions, special language packages, and other such fare. The charges for each of these are purely discretionary.

It is our belief in this user pay concept that has caused the cable companies to pressure the CRTC to allow pay television in this country. The only reason pay TV did not start earlier was that there was no effective way of monitoring viewing or collecting for it in the early days and so advertising was almost the only approach. There never was a problem with charging for attendance at movies or for purchasing books. The ability to collect for services provided is fundamental to any type of retailing. The means is now at hand to charge for selective viewing on cable.

THE SERVICE BOUTIQUE

On the assumption that the CRTC will allow a second tier of charges for entertainment and has already said it is not intending to regulate non-entertainment services, the future of cable as a retailer should be assured. But what else could the cable retailer put on its shelves.

I have mentioned security services. These were the first that established the concept of the use of cable for non-entertainment services for a charge. However, indirectly there have been other precedents. In Ottawa, for example, credit courses have been offered on cable for the past couple of years. Although the cable company does not charge for this service, the educational institution does. This is another precedent

However, beyond these initial chargeable services the role of cable as a retailer is just beginning. Despite all the talk about the types of information or service that could be provided in the home or office, there is not yet a clearly established pattern of need or desire that will lead to short run financial success.

As James Martin pointed out in Future Developments in Telecommunications: "The difficulty with providing such home services is that most of them are unlikely to make a profit for a long time. Packages that incorporate many different services could make a profit if there was a sufficient wide coverage and widespread acceptance. But the wide acceptance will not grow if the initial systems fail due to lack of profit. In other words, we have the old telecommunications chicken-and-egg problem: wide coverage is needed for profitability but initial systems cannot have wide coverage."

We know that systems such as Prestel in the United Kingdom have been operational for some time with a reasonable number of pages of information being offered.

At the present time, however, only about 2,700 Prestel terminals have been installed and most of these are on a free basis. This should not be taken as a discouraging observation, but rather to point out that we must clearly define what the client will buy, even if we have to lead the market a bit to create the needs by offering a suitable menu.

A databank pioneer in Canada, Frank Ogden, and some of his associates have proposed to Premier Communications a series of databanks that might be of use to businessmen. These include:

THE INFLUENTIAL (5,000 influential British Columbians, titles, firms, addresses, phone numbers, brief biographies, etc.)

RESTAURANTS (Where to go for lunch)

THE 100 BIGGEST COMPANIES (With senior personnel, PR reps, profiles, etc.)

ELECTED OFFICIALS AND SENIOR AIDES (This would cover all four levels: Municipal, regional, provincial, federal)

THE MEDIA DIRECTORY (All B.C. newspapers and magazines, radio stations, TV stations, with key personnel, important on-air people, columnists, etc.)

THE HUMAN SERVICE (probably liaison with Gil Evans and the Vancouver Information Service; other agencies)

ETHNIC ORGANIZATIONS

RENTABLE SPACE

HOTELS AND CONVENTION FACILITIES

THE SHOPPER (Flowers, gifts, holiday items, with a focus on the busy businessman)

TRANSPORTATION SYSTEMS and CHARTER SERVICES

NEIGHBOURHOODS

THE OFFICE DWELLER'S GUIDE (Furniture purchase and rental, temporary personnel, office space availability, copying machines, postage metres, etc.)

PROFILES OF B.C. COMMUNITIES (Elected officials, major industries, services)

I predict a large interest in services to the business community but not just of the type that can be watched in the office. Many a businessman would welcome informative programming that he could watch in the evening or on weekends. This may form a new type of chargeable business expense even though the service is relayed into the home.

WHO WILL TAKE THE LEAD

I am sure there are many in this audience who have heard me talk before about the wonders of the Wired City. Some even may recall an early attempt by Systems Dimensions Limited (SDL) to buy Ottawa Cablevision Limited so that we could experiment with some of these in-the-home and office services. Not to be discouraged by that early CRTC turndown, Premier Communications Limited and Canadian Cablesystems Limited now have their proposal before the CRTC to merge these two companies which are already the two largest in the cable industry in Canada.

If this merger is approved we are committing to make Vancouver into a world class Wired City. It is the intention over the coming five years to rewire Vancouver using the latest techniques for network organisation of broadband communications. This would provide a fully interactive 36 channel system with potential for further channel expansion. The system would have the reliability that comes from backup power and remote status monitoring.

We are further committing to install 10,000 addressable, tierable interactive devices so that meaningful tests can be run in the areas of in-the-home education, teleshopping and a variety of other information and entertainment services.

Only a company with the engineering talent and financial resources of these combined organizations could logically take the risks involved in starting such new projects. We can afford to wait for profits in a way that a smaller organization could not. Some of these projects will be successful and some will not. Those that are successful will be made available to other cable companies in Canada on a basis that will allow them to become economically viable retail offerings.

It is most important in developing these new services that we protect those who do not wish to take them, i.e. we must structure our tiering in such a way that it will not impact on the cost to the subscriber of the basic service. We expect that the basic service will be the over-the-air broadcast package of Canadian and American channels already offered, plus the community channel which people have come to expect as a service of the cable companies. The profit for Premier/CCL will come from the charging for the new tiered services as these prove to have public appeal.

THE CROSSROADS

The approval of this major merger will be approval in principle by the regulatory authorities that cable companies would be allowed to grow to their natural potential as broadband retailers of a wide variety of entertainment and service packages.

Despite my opening remarks, this could create some really big waves in the communications ocean.

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SEMINAR ON COMMUNICATIONS TO THE BRITISH COLUMBIA GOVERNMENT

RICHMOND, B.C. APRIL 25TH - 27TH, 1980

Plants only grow in the right climate. This is true whether we are talking about plants that grow flowers or plants that manufacture things.

For decades governments at all levels have increasingly tried to 'help' industrial development by either controlling it or owning it. The result has been 'the British syndrome' with such symptoms as:

• lowered productivity

• ever growing overheads

• new developments left to committee management.

All this has led to fewer goods at higher costs. This in turn is a major cause of the current runaway money supply, with the final result of the current combination of inflation and stagnant economies.

This is not to imply that private enterprise is perfect, but at least there is a natural pruning process that comes about as a result of the profit motive.

It is my contention that this natural market process should be interfered with as little as possible.

We all acknowledge that a hybrid approach is needed to some degree in industrial development. Consumers and workers need to be protected in such matters as safety, the environment and reasonable quality standards. But, particularly in the communications industry, if the government endeavours to go beyond this there is the danger of content control. This can lead to a very serious threat to the right of the user of any communications media to read, listen to or view whatever he or she wants.

If a government feels it must bias content, a better approach is the positive tactic of making it more attractive, i.e. profitable, to produce certain kinds of programming. This does not prevent anyone from taking risks in content creation if they believe their approach is saleable. An example of the positive incentives are those given to the film industry by the rapid tax write-off method.

However, beyond these general observations, in this seminar we have been asked to comment in particular on questions of ownership and control of communications structures, with the following specific topics:

1. FRANCHISE VERSUS OPEN COMPETITION

The default option should always be open competition. This does not mean there is absolutely no room for monopoly operations. I believe that Canada does benefit from a single voice grade switched telephone system. This should not be taken to mean, however, that because such a system exists it should be the only communications system.

Cable is an existing 'local loop' system but cable itself should not be considered a monopoly. Cable already has all kinds of competition:

• over-the-air broadcasts direct broadcast by satellite

• video discs

• recordings

• the telcos themselves in some instances.

If cable companies are required to perform certain duties, e.g. repackaging the over-the-air broadcast signals and presenting them in some desired sequence to the Canadian public, then in return for this they should get a form of monopoly, i.e. the license to wire an area. However, in the years to come I fully expect that the telcos will over-wire many urban areas with coaxial cable or other communications facilities, and I see no harm in this type of healthy competition.

Presumably in the foreseeable future cable companies would be precluded from handling switched voice traffic, while the telcos would be precluded from broadcast or entertainment carriage, but in many other areas they would and should logically compete.

2. CARRIAGE VERSUS CONTENT

This is essentially an artificial distinction. Cable companies already provide both. As a matter of fact, so do the telcos who are now offering such facilities as in-the-home security services.

With the wealth of opportunities facing the whole communications industry we will need more sources of content not less. If large organisations such as the telcos and cable companies can logically provide some of the content, I again see no harm in this.

Both organisations will have to ensure that reasonable access for non-carriers is provided. No doubt the leasing of cable channels will become a fact of life in the not too distant future. This in itself is one reason why cable companies will need lots of channel capacity.

Some years ago I supported the concept of the telcos or other organisations being allowed into the computer services field. I note that AT&T has finally announced it is doing this in the United States, now that its non-telephone operations have been deregulated. I recommended only that any organisation providing content on its own carriage facilities should do so through separate arms length subsidiaries.

3. NEW BOUNDARIES

Frankly, we won't know where these new boundaries are unless the climate is right for risking investment in new areas. There must be the freedom to innovate and the freedom to succeed or fail based on the commercial acceptance of the products or services offered.

Essentially, the approach is to put the viewing or listening choice back to the consumers.

Central control usually leads to narrow boundaries because the type of committee management that normally emerges almost ensures that there are: no risk takers

• a propensity to listen to too many narrow points of view, leading to watered down decisions

• a fear of ever making a mistake.

The right climate is where entrepreneurs are allowed to test the market first. If abuses appear or problems arise then legislation can be brought in to correct these. But this should only be done once the abuse is clearly identified.

The problem with preemptive controls is that governments are so concerned about possibly upsetting some part of society they allow little if anything to happen. This is very much like demanding that all banks be closed because there is an occasional robbery.

SUMMARY

The most constructive single thing in my opinion, that the B.C. Government can do is to create the right climate for entrepreneurial development. This I define as ensuring there is only the minimum industrial regulation to physically protect the worker and the consumer. Let the consumer determine the content and both program production and the physical delivery systems will be developed in a way that will create new jobs and opportunities in B.C.

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THE UNWIRED CITY

A TALK GIVEN AT SESSION 80 CANADIAN INFORMATION PROCESSING SOCIETY ANNUAL MEETING
VICTORIA, B.C., MAY 13TH, 1980

I know the topic of this Session was supposed to be the Wired City, but many of the most exciting happenings in the communications field these days are in the wireless world.

As I will discuss, this does not mean that coaxial cable should be coiled up on the floor and forgotten. Far from it. But we are going through another major change in the communications field which can be as dramatic as the change from the old copper wires of the early telegraph system to Marconi's first demonstration of wireless telegraphy.

At the very time the cable companies and the telcos are trying to position themselves as to who should provide what wired services to the home, the whole technology is moving to even more potentially exciting developments.

My own company, premier Communications Limited, recently recognised this change by altering its name from Premier Cablevision Limited, a name which I felt was unduly restrictive. The communications industry should be looked at from the broadest possible perspective and should include all the many new and old methods for transmitting information between or among people and organisations.

THE MULTI MEDIA REVOLUTION

While this term is not as catchy as The Wired City, it is more descriptive of what is happening. First, the new communications revolution is not restricted to cities. Greater attention is being paid every day to reaching rural or sparsely inhabited areas in Canada. There is also a growing realisation of the power of new communications media for developing countries on a world-wide basis. So the 'city' part of The Wired City is no longer an adequate description.

Secondly, the word 'wired' is also less than an adequate term. The telcos and the cable companies are in danger of being hobbled by their own wires if they do not realise that people everywhere are making new choices about how they obtain entertainment, communications and information services. In addition to the traditional methods such as print media, over-the-air or cable television, and standard telephone service, one only has to look at the recent revolution in over-the-air services to realise that the term 'Wired City' no longer describes the state-of-the-art.

WIRELESS VIDEO

The most obvious component of this revolution is of course direct satellite to home transmission. With several hundred illegal earth stations operating in Canada at the present time, it is becoming increasingly obvious that neither broadcasters, cable companies nor telcos can in any way restrict what people will watch. Nor should they.

If cable companies are going to survive as video carriers they will have to emphasise that cable is the best means of moving and bending signals around urban areas. Secondly, they will have to become innovative programmers providing a range of services that will only be available over cable. But more of that later.

The availability of satellite transmission has led to some unique approaches for in-the-home video communications. For example, Subscription Television (STV) is one way of providing over-the-air pay television to subscribers. A movie package is received from a satellite and broadcast on the UHF frequency in a scrambled mode. A de-scrambler is provided to the subscriber for a monthly charge and he or she can then view the desired entertainment.

Another method of over-the-air video is Multi-point Distribution Service (MDS). Here the entertainment package is again received from satellite, relayed to an omni-directional microwave broadcaster, who as a common carrier then broadcasts the signal in a limited, e.g. 30-50 km, area. The subscriber needs only an addition to his existing television antenna and a down converter to translate the signal into a regular TV video signal. This approach is proving particularly popular in the United States where many good off-air video signals are already available, and cabling is therefore an expensive approach if only pay television is desired as an additional service.

WIRELESS AUDIO

One only has to look at the explosive growth in CB radio to realise that wireless communication is increasing in popularity. It is interesting to note that at the moment the CB approach is mostly restricted to car radios, but a new use of cable might be in-the-home CB communications, as suggested by Dr. Joseph Halina of the Cable Telecommunications Research Institute. This approach would use a two-way audio channel allowing people in their homes to communicate with others who share similar interests.

Another growing over-the-air phenomenon is the use of mobile telephones, paging devices or other limited distance wireless communications approaches.

In summary, there are many approaches to delivering both video and audio signals over-the-air starting with the traditional broadcasting approach and continuing with the innovative approaches noted above.

However, even further alternatives now exist. WIRELESS ENTERTAINMENT

While the cable companies and others are fighting for pay television rights, video tape recorders and video discs are already providing an interesting alternative to uncensored and ' no commercial' in-the-home entertainment. The subscriber rents or buys the appropriate disc or tape and the only wires involved are those bringing power to the still somewhat expensive recorder and, of course, the TV set.

THE UNWIRES

Although the difference may be semantic, there are other means of carrying signals that are not 'wires' in the usual sense.

There are few who do not believe that fibre optics or some variant thereof will ultimately replace coaxial cable as being the best means for relaying video or other wide bandwidth signals. Fibre optics is not yet the perfect answer for extensive video transmission over long distances. There are still tests being run in areas such as the proper sheathing of fibres, e.g. they have a tendency to shatter under certain conditions. However, these problems will be solved as there is the added incentive of an impending world copper shortage in the decades to come.

Wave guides and other means of relaying signals may also play an important role for certain types of applications.

One might argue that fibre optics and wave guides are not really wires at all.

THE WIRELESS WORLD

All of this is enough to remind us that the communications companies of the 1980's and 90's will have to be broadminded as well as broadbanded about what is really most sensibly handled by new wired and unwired techniques. Now we should look at where cable will play a major role in the Multi Media Revolution.

THE NEW ROLE OF CABLE

I have emphasised that coaxial cable will play a role for many years to come. Direct satellite transmission to homes will not likely be attractive in urban areas. Even though TVRO's will get less expensive and smaller they are not a universal answer. After years of gradually getting rid of unsightly antennas from roof tops, I doubt that many urbanites will want to clutter up their roofs or gardens with one metre bird baths. Also, unless the receivers are agile or omni-directional, they will not be able to look at all the satellites carrying all the desired signals.

For years to come the preferred approach will be to have large dishes, less subject to interference from storms or other atmospheric disturbances, which will receive the signals and relay these through the cables to the homes.

Direct satellite signals are also subject to blockage by buildings or other obstructions.

Finally, the electromagnetic spectrum is getting very crowded. Fortunately, the high channel capacity of a coaxial cable or a fibre optic cable allows many signals to be carried with no appreciable external radiation. In fact it may be that the concept of over-the-air broadcasting in urban areas will disappear entirely. For example, in an area such as Vancouver or Victoria where cable has over 90% penetration, it would be more sensible for the broadcasters to simply supply their signal directly to the cable headend and use the broadcast approach only for remote areas reached by lower power repeaters or satellite.

THE WIRED WORLD IN THE EIGHTIES

In addition to the technical reasons for believing cable will be the best urban approach for years to come, I mentioned that cable companies will have to become more active programmers, providing unique services not available any other way.

The basic concept will be that, in return for a license to wire an area, the cable company will provide for a basic fee a series of basic services. These would include the transmission of Canadian broadcast signals and a certain number of public service signals. There might still be some local U.S. channels provided, but the priority would continue to go to Canadian broadcast signals.

Beyond that there will be multiple tiers of service for which the customer will pay or not as his tastes dictate. This is already becoming common in the United States where several levels of Pay Cable are available in many urban centres. Examples of such services would be first run movie channels, such as provided by Home Box Office, Showtime or others; sports channels, such as Madison Square Gardens; special language channels, such as Galavision appealing to Spanish speaking groups, etc.

At the present time this type of charging for tiered services is not allowed in Canada, although the Federal Government is holding Hearings this year on the possibility of allowing a primitive form of Pay Television in this country. (In the meantime, we should remember that Northern Canadians who are illegally watching the growing number of such signals from American satellites are really the advantaged Canadians when it comes to television viewing - a strange anomaly considering that the urban TV viewers were for many years the privileged group.)

BEYOND PAY CABLE

The cable companies can however provide a range of services which are much more imaginative. For example:

Cable Mag. This would be true narrowcasting. In the same way that people now subscribe to hard copy magazines in their particular areas of interest, the cable companies could provide specialised programming on boating, bridge, gardening or any other subject in which they believe a group of people would be interested. Those wanting that information would pay a subscription fee as they would for a magazine. In addition, advertisers who want to reach these specialised markets could support the process by placing their advertising on these channels. The advertiser would benefit by knowing that the viewers were specifically interested in the products offered. The viewer would really appreciate the relevant advertising as opposed some moral distaste to such an approach, we should remember that such gambling has already been condoned by governments in nearly every part of the world. The cable would only make the whole process more efficient and convenient. One can also argue that the morality lies in the use of the monies so raised rather than in the process. That is a much more complex question.

OTHER CABLE SERVICES

There has been so much talk about other possible cable services that I have deliberately avoided them in this discussion. I have been delivering talks and papers for at least eight years on the advantages of in-the-home education, teleshopping, cable-monitored security services, interactive polling, etc. Undoubtedly these will form part of the Multi Media Revolution that will be carried on cable.

The fact that so many of these services have been so long in coming is partly the fault of our industry which has just not been aggressive enough in making a case as to why these are both desired and feasible. However, some of the blame must also go to the regulatory authorities who seem to be so fearful that they might upset the traditional broadcasters by fragmenting audiences that they prevent anything from happening.

I believe that the greatest contribution cable companies to the lowest common denominator advertising and programming now received on the regular networks.

There is no doubt that the traditional over-the-air broadcasters will object to this, but they will still be able to offer material and advertising of broad general interest.

Cable Mag is one reason that we believe the 50-100 channels so often talked about will become a necessity in the years to come.

Cable Audio. A unique suggestion by James Martin in "Future Developments in Telecommunications" is the use of one video channel to provide perhaps 100 channels of high fidelity stereo music. Each channel could be dedicated to a particular type of music, or indeed a particular composer, e.g. one could have a Beethoven channel, a Scott Joplin channel, or whatever. It might even be possible for people to place requests for music to be played at or near a specific time. As the price of vinyl for records escalates with the cost of oil, cable could provide a limitless substitute for records in the home.

Cable Games. This term is often taken to mean games that can be attached to your TV set. I believe a broader definition would be using cable for in-the-home betting on real or computer simulated sporting or other events. In-the-home lotteries or bingo games would be quite possible. While there may be can make in the future will be in providing an enormous variety of services from which the public can choose and for which the public will pay according to their own desires. Surely this is the real challenge of the Multi Media Revolution.

As long as the regulators are afraid of what might happen in Canada if the communications companies are given freedom to experiment, then nothing will happen. The problem is it is happening elsewhere and Canada is losing its lead as an innovator in the communications field.

HOW MANY WIRES

The telcos and some people in the federal government have been pushing the idea that a single wire run by one company is the answer. This I cannot accept.

First, I believe that there is more than enough potential for both the telcos and the cable companies in the years to come to absorb all their energies simply providing new services.

Secondly, their plants are so essentially different; the telcos providing a switched low capacity network and the cable companies providing a basically unswitched high capacity network, that they are really complementary in many ways. If they continue to bicker about who should do what, both could be upstaged by the new developments referred to earlier in this paper.

Thirdly, I am fundamentally against the idea of having only one supplier of anything. Canada years ago decided it would not have just a single airline or a single railway or a single radio broadcasting system. I am sure that those of you in the computer field would also believe that your field has benefitted by not just having IBM.

I believe that the Canadian Radio-television and Telecommunications Commission now believes this. This was demonstrated in their recent decision on the CNCP interconnect issue.

I believe the telcos and the cable companies can work together for some types of applications. However, I have no concern either about direct competition between the two where practical, e.g. security systems.

I also have no objection to the telcos becoming programmers if their programming operations are kept at arms length. The cable companies should do the same. This is the same argument that I presented years ago when Bell wanted to enter the computer services industry. The concept was accepted by the federal government. It made sense then and I believe it makes sense now. The cable companies welcome competition. Even now they are not monopolies as there is all the over-the-air competition I have talked about in this paper.

Cable companies are the other local loop. While it may not make sense to have dozens of local loops servicing a home, I am firmly of the belief that we should not have just one.

I hope we put this single wire concept to bed once and for all and realise there will be and should be many paths into the home, both over-the-air and through wires, in the Multi Media Revolution in the 80's and beyond.

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CONFERENCE BOARD MEETING

HARRISON HOT SPRINGS. MAY 30TH - JUNE 1ST, 1980

THE RESPONSIBLE CRITIC

"Mediocrity is the easiest thing in the world to achieve. Just start attacking the people who have been working like slaves to establish things, make money scarce, concentrate on errors of judgement rather than the successes and you'll get it sure enough. That's not criticism you know, that's bitching and it's a very effective instrument of destruction."

- Erik Bruhn (Quoted by John Fraser, Globe and Mail, December 2nd, 1972).

Last week, I spent four days at a CRTC Hearing;

- about three days were occupied with interventions by groups representing small minority interests.

- many good and responsible comments were heard as well.

- no question, such groups must be heard, but I have a growing concern about the influence of irresponsible minorities in society.

I say irresponsible because these groups often offer no real alternative and have no responsibility for developing new businesses, taking risks, or creating or running anything at all.

The answer is not to deny them the right to protest - far from it.

The approach we should take is to make sure that such comments are seen in perspective.

- we need to ensure that we have an informed and responsible press, i.e. responsible critics.

THE ROLE OF CRITICISM

In my view, the role of criticism is to encourage change for the better.

Many critics, however, recognize the rights of minorities but ignore their obligations to use those rights responsibly.

Regrettably, many of those in the news media have come through an educational system with little orientation toward business. Young graduates of journalism school move right into reporting jobs never having had the responsibility of managing anything.

These well intentioned but inexperienced reporters who do most of the interviewing these days tend to pick up the inflammatory positions of the minority protest groups and often give a very unbalanced picture in the media.

The consequences of this can be very costly. I am one who believes that governments in the industrialized West in general try to do a conscientious job. However, with the constant irresponsible criticism fewer and fewer competent people will run for public office. As you and I know as business men, the best approach is always to put the right person in the right job. Without the right people in our top political jobs the country will be in a serious problem.

I believe the irresponsibility of much of the media is a major cause of the declining ability of governments to cope.

Decisions become less and less rational as minorities* views tend to dominate. An example is the uranium mining decision in British Columbia.

A POTENTIAL SOLUTION

Obviously not all of us can run for elected office, but we could play a more active role in ensuring a balanced view is presented to the public. We could do this through letters, articles and speeches.

We can contact our universities and offer co-op programmes for students to expose them to business. We can offer to talk to students. We can go as far as to encourage the teachers of our youth to spend time with business either on sabbaticals or through contracts.

We can encourage more dialogue with government which is not as difficult as many imagine. It only takes time and effort. We can, as many of us do, volunteer time to serve on government committees.

In making these suggestions, I am trying to be helpful and be a responsible critic of the critics because I believe this is a serious problem in modern democratic society.

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ALTERNATIVE APPROACHES TO NETWORKING IN THE 1980'S FOR THE DISTRIBUTION OF NEW TELECOMMUNICATIONS SERVICES

Annual Meeting of the Canadian Telecommunications Carriers Association Vancouver, B.C. June 24th, 1980.

Like Dennis Wardrop, I originally expected to discuss some of the fascinating proposals for new broadband communication networks and the services that these networks will provide in the 1980's. However, Dennis has chosen to address regulatory, economic and political considerations rather than the technical. As I have only a few minutes to comment on his Paper, I too will restrict my comments to these areas.

I am not surprised at the conclusion drawn by Mr. Wardrop, for the 'single wire' concept is the favourite theme of the telephone companies in Canada. It is not new.

Terry Heenan said to the CCTA Annual Meeting in May, 1978: "That the telephone companies are convinced that they must be the owners of any such plant to be made available on a common carrier basis to entrepreneurs for various purposes.

"We believe it is in the public interest that if, as and when we get to the point where there is one broadband cable distribution system, it ought to be owned on a common carrier basis by the telephone companies."

Again, from the Bell Canada Annual Report of 1978, "Ideally it would make economic sense if there were a single integrated network in Canada providing the facilities for all telecommunications - voice, data, or visual. This would avoid wasteful duplication in the use of scarce resources, and reduce costs.

"In fact, the advent of fibre optics now being field tested in Bell Canada's network will in time remove any technical justification there may have been in the past for running separate telephone and cable tv lines in the customers' homes."

The telephone companies have clearly laid out . their approach which is to eliminate the cable companies and establish a single monopolistic system in Canada to provide all telecommunications' systems.

As the token cable participant in this Conference, (as Lorne Parton of the Vancouver Province noted, "the lamb amongst the wolves" ) , you would expect me to take exception to this approach. I do take exception to it because I believe most strongly that this nation would not be well served by a total lack of competition in the telecommunications industry.

This is not an emotional reaction, but one resulting from extensive observation of the telecommunications industry in this country over many years. I am always the first to acknowledge the very fine voice grade switched network that this country enjoys. However, I must remind the telephone industry that they have not always been the innovators in this country. They had every opportunity to enter the cable television business thirty years ago and, frankly, dropped the ball.

I further watched the telephone companies miss opportunities in the growing field of computer communications to the point where at my former company, Systems Dimensions Limited, we switched most of our lines to CN/CP. It was only after this action by ourselves and other major companies in the computer field that Bell finally took the step of setting up the Computer Communications Group. Let me also acknowledge that they are now doing a good job in the field, but in my opinion it was only the existence of a strong competitor that caused the telephone monopolies to make major strides forward in these and other areas.

This single system syndrome, leading to higher costs or less innovative services, is not restricted to the telecommunications industry. I doubt if there is anyone in the audience who would not believe that the computer industry is better for having some competitors to IBM. Or that Air Canada is a better airline for having CP. Or that the CBC is a better network for having CTV and the independent producers. Or Canadian National better for having CP in the transportation business.

Edward N. Ney, Chairman of Young and Rubicam Inc., at a conference of the Association of National Advertisers in New York said, "Television made print a better medium by threatening its future. It is quite possible that the new wave of communications media will do the same for conventional television. Innovation breeds invention. Insecurity breeds inspiration."

I believe that anyone who feels that a single monopolistic entity is the best way to go should be sentenced to spend two weeks behind the Iron Curtain. I am sure that as they are waiting for their delayed Aeroflot flight to take off, they will quickly tear up the paper that even suggests such a process.

Single monopolistic systems always appear better on paper. If this were a perfect world, they might be better. But the reality of how the western world got to be such an advanced civilization is that competition exists and is encouraged.

The reality is that there are two wires already. There have been two wires for over thirty years. There will be at least two for as long as any of us can reasonably foresee.

I believe it is essential that the telephone companies and the cable companies stop the rhetoric and start the research. We have enjoyed excellent relations with B.C. Tel over the years, and are even now examining areas of possible joint development. It is my belief that there are a number of areas in which the companies could co-operate, although there will also clearly be a number of areas of new services where we will be competitors. I see no difficulty with this and in fact believe in the long run that the public will be best served by a combination of co-operation and competition among the various organisations, including CN/CP, who operate in the communications industry.

The most important factor to remember is that one cannot consider only the efficiency of wiring. As pointed out by Carl Beigie of the CD. Howe Research Institute, an even more important efficiency comes from, "... the optimization of the rate of new undertakings. From this dynamic perspective, competition may lead to benefits that outweigh the static costs of a certain duplication of resources. Dynamic efficiency relates to the pace at which new technologies are developed and put into application; to the rate of introduction of new services; to responsiveness to new consumer needs; and to the extent to which experimentation and risk taking occur."

The telephone companies cannot legislate away competition. It will exist in the form of over-the-air broadcasting, direct broadcast by satellite and a variety of other media. The telephone companies should recognise the essential complementarity of the cable and voice grade networks.

They must recognise that the cable companies are unlikely to ever give up their right to develop their own kind of plant. There is no single path to perfection and alternative approaches will allow the plants to be optimized for different needs.

The cable companies would be reluctant to put their entire future at the mercy of the rates that could be charged by the telephone companies. The same reluctance applies to broadcasters who could logically give up their over-the-air broadcasting and rely entirely on cable. They have a similar concern, despite the logic of the situation in major urban areas.

If the cable companies are going to pursue their prime marketing approach of making more choice available to the consumers, then they will have to have control over at least some of the content and certainly over most of the capability of the plant to deliver the services.

There is more than enough for everyone to do in the communications industry if we all worked as hard as we could for the next thirty or forty years. The range of new services is that impressive.

Unfortunately, the rhetoric that is being undertaken by the telephone companies is leading to counter rhetoric by the cable industry.

The situation is being worsened by actions such as those by SaskTel in jamming House of Commons broadcasts that have been authorized for delivery by a cable company by the Department of Communications and the CRTC. Such actions are simply reprehensible and frankly make me somewhat ashamed of our industry, which is supposed to be thinking of the public interest first.

No technology was ever improved in a court room. But this is exactly where the current path is taking us.

The situation is similar to that in the Middle East. There will never be peace in that area until both sides recognise the right of the other to exist. Only then can meaningful discussion take place.

I believe that in B.C. we have demonstrated that with the right attitudes on both sides there is a workable solution. My reply to Mr. Wardrop's Paper is that the 'single wire' concept is economically undesirable and politically impossible. The sooner the concept is put to bed the better off the whole communications scene in Canada will be.

I conclude with an offer to do anything I can to reduce the frictions that currently exist between the telephone companies and the cable companies. The cable companies are not going to go away. Neither are the telephone companies. If we work together in the eighties where feasible and compete where sensible, we will be serving the public in the best possible way.

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INVESTMENT PRESENTATION

Toronto Investment Dealers Association. August 29th, 1980

This is the first time I've had the opportunity to speak to the investment community as part of the Canadian Cablesystems group. I would like to tell you how genuinely pleased we all were at Premier when the CRTC allowed the two companies to combine. The bringing together of the two companies gives us the unique opportunity to combine human, financial and technical resources to create a base unequaled in this industry in North America. The integration of the two companies is already well underway. I will have operating responsibility for the Western systems, including Calgary, while, as Colin mentioned, he will handle the East. Both of us will operate within a common framework of policies and guidelines.

The integration of CCL and Premier means the joining of two pioneering companies in the cable communications field. Premier started nearly thirty years ago cabling a part of the Vancouver area. The company went public in 1971 and has demonstrated a track record of steady progress in the years since then.

In the year ending August 31st, 1980 we anticipate showing reasonable progress in earnings per share over the prior year.

As Graham Savage mentioned, CCL has completed over sixty years in the film and cable business. I emphasise this because together we are not only the world's largest cable company, but combine more experience and demonstrated track record than any other company I know of in our industry.

Colin pointed out that the integrated Toronto operations of CCL are now the world's single largest system. I am pleased to say that Vancouver, which held that title for many years, is the second largest. Vancouver has over 90% penetration in its service area. It is a stable system providing a good quality service although limited in scope.

Now, however, the system does need upgrading so that it will be ready to present to the Vancouver public the many new applications we have planned. We expect to expend about $30 million in the Vancouver rebuild alone over the next five years, but with this expenditure we will have a system that will provide high revenue earning capacity into the mid-1990's.

This expenditure will allow us to increase our capacity from approximately 17 channels to a minimum of 35. We expect that many of these new channels will be used for services for which we can charge premium amounts.

We need this expansion of channels, not only for the direct revenue they will produce, but also to encourage our clients to lease converters. We have already proposed to the CRTC a number of new services with this in mind. Converter leasing is a significant new source of unregulated revenue to Premier.

It is our intention to develop Vancouver into a model system for Canada. We will then use the experience and the techniques developed to expand our systems in Victoria and in the Fraser Valley.

Victoria is also an established system with over 90% penetration. Again, it is a mature system which paradoxically has one of the lowest monthly rates in Canada. We view this as an opportunity because, with the expanded services that we can provide, there is maximum room for future rate increases.

Here is a good example of where we can capitalize on the experience of CCL creating a true economy of scale. For example, we plan to implement a Parliamentary Bureau in Victoria along the lines pioneered by CCL in Ontario. We are going to add new alpha-numeric services, again leaning on CCL's experience. It is this shared development that should give us maximum leverage in the Western systems.

Fortunately, Victoria is already partially upgraded to accommodate two-way services. In part of the City already converted we have an experiment underway in cable security systems. This we believe to be a significant new revenue source, and one which has been authorized already by the CRTC.

I mentioned that Toronto is now the largest cable system in the world. Fraser Cablevision is the world's longest. It covers many of the communities stretching up the Fraser River Valley, covering about 200 square miles and including six municipalities. The Fraser system is already partly at 35 channel capacity, but will also be fully upgraded to be able to take the new services proposed.

The Fraser system has recently been granted a rate increase and we have just applied for another one. The Fraser area is one of significant growth potential.

Premier has a 45% interest in Western Cablevision. Western covers the Surrey area of B.C. which is one of the fastest growing areas in the province.

As we develop new services, it is our intention to feed these systems from Vancouver, hence reducing the cost.

We were very pleased to learn a couple of weeks ago that Premier had been awarded the contract to build the Knowledge Network of the West, (KNOW). This is a unique institutional network linking the universities, teaching hospitals and other institutions in British Columbia. It will be a shared cost project with the provincial government. We were particularly pleased because this represented a win over the local telephone company. We believe this demonstrates the 'know how' of Premier's engineering group, and the respect it has in the province. This will also give us additional channel capacity on a shared cost basis.

Another significant advantage brought to Premier by the CCL/Premier association is that CBS will no longer be a shareholder of Premier. As you may be aware, this is the reason that Premier was unable to participate in cable franchising in the United States. It is now our hope to assist the CCL group in their franchising activities as will be described in a few moments.

In the meantime, however, Premier has been aggressive in the over-the-air pay television business in the United States. We have opened up operations, either alone or on a partnerships basis, in Seattle, Portland, San Francisco and Sacramento. Because this does not require cable, this is giving us experience and exposure which may be particularly valuable in developing inexpensive methods of servicing smaller communities. This could be of significance in Canada's Western provinces in particular.

These MDS operations as they are called may also be helpful in pre-selling markets such as Portland, where we are also endeavouring to obtain cable licenses. An MDS operation may also allow us to serve peripheral areas that are not initially economic to cable.

As has been described, Colin will be responsible for operations in Eastern Canada, including some former Premier companies, and Premier will become responsible for the CCL-owned operation in Calgary. As you know, Calgary offers unusually high household penetration and disposable income, and is another area of good growth potential.

However, Premier/CCL is not restricting its opportunities to North America. Premier already has two cable systems in Ireland - Dublin and Waterford. We believe there is significant growth potential in the Dublin area, and are also investigating Cork, Limerick and Galway.

The Irish government has a mature approach to granting rate increases as these are essentially indexed. We recently received a substantial increase in Waterford and expect to get the same in Dublin. Our partner in Ireland is the Allied Irish Bank.

While it is our intention to stay primarily in the cable business which we know best, we have also launched an interesting experiment in the linking of a radio paging service with cable through our Irish operations.

We also believe that there is significant potential for pay television development in the United Kingdom. We are well positioned with our base in Ireland to expand to the UK, and with our wholly owned subsidiary in Amsterdam we are expanding our contacts on the continent.

While the management of these operations may move to Colin in due course, Premier is looking at expansion around the Pacific Rim. Australia is now showing great interest in cable television and may couple this with pay television in the early stages. Our experience in working with United Kingdom technical standards will stand us in good stead in these areas.

Premier is well financed to carry out its expansion plans. We have a 9 1/8% loan arrangement with the Mutual Life Insurance Company of New York in the amount of about $13 million, and another with Chemco Canada Limited at 10% for $5 million. With our strong cash flow and healthy cash balances we will be able to reinvest in the future capacity for new revenue creating services.

Finally, I would like to comment once again on one of the greatest benefits that we have already found from putting together these two companies. This comes from the cross-pollenization of ideas between the two management groups. Even during the first four weeks the two managements and staffs are working extraordinarily well together. We had lots of practice leading up to the CRTC hearing and this is continuing.

The combined operation just has a good feel about it!

I will now turn the meeting over to Phil Lind who will discuss some aspects of our operations in the U.S.

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MARKETING THROUGH NEW TECHNOLOGY

A TALK GIVEN TO THE SALES AND MARKETING EXECUTIVES OF VANCOUVER
SEPTEMBER 18, 1980

Lord Acton made the comment about seventy years ago that, "We are all Socialists now." I expect that today he would have changed that to say we are all salesmen now.

Today we are selling all the time. This is true whether we are professional sales and marketing people or even non-marketing executives endeavouring to sell our ideas farther up the line. The process is all the same. What we are trying to do is constantly improve our 'close' rate ― this is the only aim of salesmanship. The process is simple; you assess the customer's real desires, i.e. make the sale easy; you tailor your pitch; you close before the customer changes his or her mind.

When you look at much of the current media marketing, either there is not much opportunity to really analyze the customer's desire, or there is no chance to close the sale once the pitch has been made. There are attempts to do this, e.g. with coupons or other devices to allow the client to make an instant decision, but the return rates indicate that the success ratio is not as high as one would like. They still require the client writing out an address, possibly finding a stamp, addressing an envelope, and certainly require him or her walking to the post box.

Think of how much more effective advertising would be if:

• The client could select on a TV set just the ads he wanted to see. In this case there is no problem in assessing the client's real desires. He or she is already partly presold.

• The potential customer views only advertising relevant to his or her interests. The pitch is effectively already tailored.

• The client can buy the moment he sees what he actually wants to purchase. The ‘close’ immediately follows the pitch, much as is done in face-to-face selling which is so effective.

It can be done. The process is called "teleshopping".

TELESHOPPING

I was asked to talk about Marketing Through the Media and Marketing the Media. Teleshopping is an example of the former. Consider first the more traditional method of in-the-home marketing. Mail order catalogues or flyers are printed. These are proving to be increasingly expensive. They are very un-selective in terms of the audience, although, of course, attempts are made to send catalogues only to those who have ordered before, or to distribute flyers only in districts likely to buy the product. They are hand delivered, and with postal disruptions this will become even more difficult in the future. They make use of a scarce national resource, i.e. paper. They become out of date quite rapidly, particularly in the area of pricing.

It is not uncommon to have large catalogues going to the printers months in advance of mailing. In inflationary times, prices can be out of date before the catalogue is in the hands of the consumer.

Catalogues are also far too easily thrown out. We all remember the supposed use of the old Eaton's catalogues in rural communities!

In some forms of direct mail no credit check is immediately available. This leads to requirements for prepayment, COD, or the use of an established credit card. These may be further deterrents to a sale.

It is not easy to have associated sales, i.e. there is no on-the-spot salesman to remind people if they bought a camera they should also be looking at a slide projector or whatever. The location of related items in the catalogue, of course helps.

Finally, it is very hard to create new demand by coupling the static picture of the item with a dynamic demonstration of how the item could be used.

Teleshopping corrects many, if not all, of these shortcomings. What it presents is an electronic catalogue with the possibility of immediate interaction by the customer.

I am sure the general approach is well known to you. In its simplest form still frames would be projected in the TV set at specified times so the client could watch when shoes are being advertised by various companies. In this primitive form of teleshopping, the response could even be given by telephone when a particular item is desired.

This, in fact, is only marginally better than a catalogue but at least has the opportunity of comparative shopping and being up-to-date. A more sophisticated method, which would require two-way cable, would enable a customer to indicate on a key pad attached to his set the item number, quantity, etc. for a desired item. If the key pad were replaced by an alpha-numeric terminal, the client could also key in specific instructions, e.g. deliver Thursday or leave on the back porch.

In either of the first two examples, automatic credit checking could be arranged and, in the latter case, automatic debitting of the account would be quite straight forward, (like the T.D.'s new "Green Machine").

A further sophistication would be to allow the client to use his terminal to select from a menu of possible sales categories the one in which he or she may be interested. Then, selectively, only those frames are shown to the client. This allows the potential customer to shop at his or her leisure. And this meets another of my early criteria for allowing the customer to essentially sell himself.

All the above are quite feasible with today's technology. With sufficient channel capacity, however, and the advent of much more sophisticated storage devices, the use of full film clips might be considered. For example, if a client were interested in a hand saw, he could request not just a still picture but a presentation looking like a regular ad from each of various companies, and then make the selection of the best price and model available. These pitches would be short demonstrations of how the saw meets the client's needs.

With this kind of video rather than the still frame approach, associated sales could be promoted, e.g. the client could get a demonstration of how the purchase of a mitre box would make his saw much more useful.

This latter form of in-the-home shopping will likely still be some time away because this requires much greater bandwidth into each individual home as well as the trunks of the system. It is relatively easy to have, say, ten thousand frames of teleshopping information circulating on one channel and the client can pick off the ones of interest. A full video pitch, unfortunately, requires a full video channel during the time that it is transmitted.

To date, I have promoted this process as though it were the answer to everything. There are still some problems to be solved. Those of you who have tried to use a tree structure to access information from a Prestel or Telidon-like system would quickly realise that this can be a frustration. It is somewhat akin to using the Yellow Pages when you do not know exactly under which category your item is listed. In fact, Prestel in the United Kingdom, which has had a couple of years advance experience over Telidon, uses a directory, i.e. a printed catalogue, allowing you to go directly to particular items rather than examining broad categories and gradually narrowing down the area of interest.

Another concern people have is protection against mis-use. Naturally, a password or account number would have to be supplied for direct ordering, thus discouraging the children from playing with the device. Most terminals will also have a key which can lock the device out of use.

Finally, the ultimate system would include a home printer. There are already a number of thermal or electronic printers available that could do the job. It would certainly be handy to get a printed confirmation of your order, or your theatre ticket, or your restaurant reservations, or whatever. The alternative would be to have the confirmation mailed to you or your theatre ticket picked up at the box office at performance time.

THE ELECTRONIC RETAILER

This whole approach of teleshopping really allows the retailer to provide electronic shelf space for all kinds of marketing possibilities. Consider just some of the following:

Want Ad Replacement

Think of the waste of paper and space if you have a relatively unique product to sell and are trying to match this with a buyer. If you could input your ad electronically and have a computer search for a match, the process would be much more efficient. (To a limited degree, cable companies already do this through the medium of swap meets, although no computer is involved here.)

Real Estate

If such selling would be effective for miscellaneous items, it would certainly be effective for real estate. We have already proposed to the CRTC a real estate channel. At the moment this is also somewhat primitive as it requires the agent to call the office and ask for the display of homes in a certain area and a certain price range. However, it is a great step forward as full colour pictures are available and the information is constantly up-to-date. The client can obviously review many homes sitting in the agent's office without the wasted time of driving around the city. You can imagine how much more effective this can be if one could have a video tape tour of a house without ever leaving the real estate office, or possibly without ever leaving one's home.

Travel

Without going into details, you could quickly see the advantages of selling travel this way. A travelogue could be shown, followed immediately by the various competitive packages to that particular location. The client could make instant reservations.

Menu Selection

There would be no reason why we could not sophisticate the current comparative shopping packages by letting the client choose a menu and then have the computer come up with where to buy the various components of the meal at the lowest total cost.

Stock Market

At the present time all we do is provide the stock market listings. Needless to say, a client from his or her home could easily order shares by a terminal, allowing quick reaction to short trends.

Tele-bidding

The same approach could be used for an auction. Clients, from the comfort of their home, could watch items being offered and make competitive bids by terminal.

Lotteries

Instant lotteries could be used in association with the sales along the Reader's Digest line, but with immediate client interaction.

These are only a few ideas just to get you thinking about the possibilities. Clearly, tele-polls could be conducted and are already. Marketers could get instant reaction to planned new products. Interactive surveys on the effectiveness of advertising could be taken.

We should not forget the use of audio. In addition to the video presentation, one could have a pre-recorded audio side band to add the human touch.

Finally, there are advanced concepts, such as the tele-mag approach. People have often asked what we would do with a hundred or more channels. The answer is to narrow-cast to select audiences both programming material and advertising that would appeal to their particular interests. The concept is much like that of a magazine. Special channels could be established for boating, bridge, gardening, or whatever other interests people may have. They would subscribe to the channel, but the channel would also be supported by tailored advertising. Such advertising would be very effective because it would only be viewed by those who are obviously interested in buying new brass fittings for their boat, for example.

MARKETING THE MEDIA

I have not left much time for the discussion of marketing the media itself. This is just as big a topic.

Consider for example how the cable capability can become a service in itself. We are already developing in-the-home security services, where the cable is an integral part of providing medical, fire and police burglary protection services. Home monitoring services are already becoming part of this approach to using the cable as its own product.

I could go on and talk about the advantages of electronic mail, interactive in-the-home computer operations, and similar services, but I will leave some of this for discussion. I believe it is more important to look at the reality of all the "gee wiz" items we have been discussing.

WHERE ARE WE NOW?

Technically, all of the above is possible. In fact, it is closer than any time since the early 70's when I and others first started talking about these possibilities. The hold-up so far has been the regulatory environment more than anything else.

I am optimistic, however, that with the recent decision to allow CCL and Premier to merge, the CRTC was effectively saying that they accepted the concept that cable would and could be used for many of these new services. There is still no guarantee that we will be allowed to proceed, but we made as part of our pitch to them a commitment to spend millions of dollars over the next few years in research and development, much of it in the Vancouver area, and included a commitment to experiment with many of the concepts I have been outlining.

We are therefore committed to give this a try. This leads me to my conclusion.

There is no point in my simply outlining to you all the myriad possibilities. You, as the Sales and Marketing Executives, are the ones who are going to have to make the system work. We will be essentially only the retailers of the kinds of things you want to have done. The main advantage of a meeting such as this is that it will now allow us to get into a meaningful discussion of what you really view as the future potential for this fascinating new electronic media.

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VICTORIA PROGRAMMING RECEPTION

OCTOBER 21, 1980

The price of a drink is a short speech.

It is a real pleasure to welcome you all to this reception - it is a way of our saying thank you for the outstanding contribution that you have made to the success of the Channel 10 operation.

The occasion is the meeting of the Boards of Directors of both Premier and CCL in the West. As we promised we are holding the first meeting of the newly constituted CCL Board in Victoria tomorrow.

There are many other events over the next couple of days. They are all aimed at telling the people we serve that we meant what we said in the many commitments we made when these two Canadian companies were allowed to merge to form the world's largest cable television organization.

In essence, we are really saying that we are going to make our systems ones of which we can all be very proud.

We are particularly proud of the Channel 10 operation in Victoria. Tomorrow I will be outlining at a breakfast meeting many of the achievements to which we can already point. In addition I will be outlining some of the new programmes we have underway including the establishment of a B.C. Parliamentary Bureau.

Our main reason for getting together, however, is so that we can all get to know you better and personally give you our congratulations on your forthcoming tenth anniversary.

The community channel of Victoria Cablevision was one of the first of its kind in Canada. Now we have a staff of 13 and broadcast over 2000 hours a year. This is a great success story. We plan to build on this base to make the operation one of the best in the country.

Our thanks to all of you. Have a great 10th anniversary.

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COMMUNITY LEADERS IN VICTORIA, B.C.

OCTOBER 22, 1980

I am very pleased to welcome you this morning on behalf of the Directors of Canadian Cablesystems Limited and those of Premier Communications Limited. As you are aware, these two companies have now merged to form what is likely the world's largest cable television organization with over 1.3 million subscribers in Canada, the United States and Ireland.

My purpose in talking to you today, however, is not particularly to outline all the things we are doing around the world, but rather to talk very specifically about Victoria. I hope this will be the first of many opportunities we will to keep you up-to-date on what Premier/CCL is doing in the City and in B.C. in general.

I also hope to open up a dialogue about what we can do to improve the services we provide to the community a community of which we are all very proud.

Mind you, dialogue is not a problem in Victoria. City is well known to the CRTC for being a lively place for outspoken opinions. They may in fact use terms other than lively to describe what goes on here, but then in fairness you probably have some other ways of describing the CRTC from time to time. It is not just the presence of the B.C. legislature that makes Victoria such an outspoken community; it is the interest that the community shows in what goes on in their broadcasting industry.

Although those of us in the CCL/Premier organization may not always agree with everything that is said, we really like the openness of the frank dialogue that always goes on in this City. Nothing is worse for a communicator than to have a blah environment.

PROMISES, PROMISES

At the CRTC Hearing last June we made a number of promises that involved the City of Victoria. The first of these was to hold our first combined Board Meeting in British Columbia. That Board Meeting is taking place today in the Empress Hotel, and I am sure will be just the first of many that we will hold in the West.

But beyond that people in broadcasting are always telling you how great it will be. We promised a lot. We intend to deliver.

Let's be specific about some of the things that we are planning for Victoria.

1. Expand the Plant

We did rebuild the Victoria cable plant several years ago, and in fact now have a good reliable system. However, it is our intention to expand the capacity of the plant to a minimum of 36 channels by December 1985. More important, it is our intention to make the system even more reliable by making it two-way.

A two-way system will allow us to monitor the status of the system so that rather than waiting for our subscribers to tell us there is a problem, we will be able to pick this up and dispatch crews to fix the problem immediately.

As I will describe in a moment, however, there will be other benefits to making the system two-way. The addition of more channels we also feel is necessary because we believe that the main reason for cable is to provide more choice. Let's look at some of those choices.

2. New Channels

We are planning our system upgrades in stages. The Victoria system should be at about 27 channels by the Fall of 1981 and these are some of the new additions we are hoping to provide to you.

• Educational. We have assigned Channel 18, which is sometimes known as E (for Education of course) to the Provincial Government who are themselves planning to provide 2-3 hours of educational programming per day for the early part of next year, with a fuller schedule to be developed throughout 1981. This will be provided under the auspices of the KNOW organization of the Provincial Government. I will, however, leave it to Dr. Walter Hardwick and others to make the detailed announcements in due course.

• Transportation. It appeared to us that we could provide an excellent service by providing flight arrival and departure information for the airlines, with an emphasis on any problems that may be occurring. The same could be done for ferry sailings, trains, or even highway data. We are now working to develop a very meaningful channel of information in this area.

• Environment. Travellers, boaters, fishermen and many others depend on constant up-to-date specialized weather information. We believe that we can provide this not just on a local basis but also with constant updates on the provincial and national weather scene, possibly utilizing satellite photographs. We may not have all these features on day one, but we are working closely with computer and data processing firms in Vancouver to develop some of these new features.

• Financial News. We are not just talking about stock exchange quotations, but possibly the provision of complete business and investment information services from sources such as Reuters.

• Consumer Channel. CCL has established a most helpful comparative shopping channel in the East. We hope to combine this with other useful information dealing with health, exercise, diet menus, budgeting, community events and other consumer information.

• Broadcast Repeats. CCL has always been very sensitive to the need to provide more exposure to the best of Canadian productions. We plan to dedicate a channel to the rebroadcast of Canadian programming so that more Canadians will get a chance to watch more of what their own country creates.

• Expanded and Improved News Service. We envisage that this will be a replacement for the current Broadcast News service with more emphasis on local news and hopefully improved graphic presentation.

• Additional Station. We understand that a new station, using the familiar call sign KCPQ, will start broadcasting from the United States sometime this Fall. The fare they will offer will be quite different from that provided by the regular U.S. networks or PBS. We expect that we will continue to carry this to our Victoria subscribers.

• TV Listing. With all of the new channels we also plan to have an electronic TV guide, so that through your television set you can get a preview of what is coming up on all these various stations.

Our aim is have channels such as the above available to our viewers by the end of 1981, subject of course to CRTC approval. We have already applied for approval to add such new services.

3. Make it All Easier to Use

It must be obvious of course that to access all these new channels a subscriber would have to have a converter. As you know, most TV sets now have a rotary dial that only allows access to 12 TV channels. For anything beyond this one needs a special device allowing access to 36 or more channels.

We expect that many new models of converters will be coming out in the next few years. To make it easy for our subscribers to obtain these we plan to launch a converter rental programme. This will give a subscriber the option of either purchasing his or her own converter or renting the device by paying for it on the regular cable invoice.

4. B.C. Parliamentary Bureau

Our approach would be to establish a Parliamentary Bureau in or near the legislative building which MLA's could conveniently use to tape or broadcast live whatever comments they may wish to make directly to their constituents via cable. We believe the MLA's will like this feature as it gives them a way to express directly to their constituents their views on new matters of local interest.

We are not talking about coverage of the B.C. Legislature itself, although this is something we have had discussions about with the Provincial Government. We are, however, planning to change the current House of Commons channel and add to the present programming presentations or discussions by members of the B.C. legislature.

We have so far received enthusiastic support for this concept from all parties and are at the moment working to finalize the details.

5. Security Systems

Victoria has been selected as one of three major experiments by the CCL/Premier group for the start of a major new cable service - we call this Victoria Cableguard Limited.

This is a security service covering fire, medical and police alert systems monitored constantly by the cable company. This is another area where we require a two-way system and one of the advantages of upgrading the plant to this capability.

The initial area for this system will be in Gordon Head and we will begin marketing this new service in early November.

6. Community Programming

I have left to the last a very important community service provided by your cable company - the community channel on Cable 10. I am particularly proud to announce that on Saturday, November 1st Channel 10 will itself be ten years old. A number of special events are planned to celebrate this event.

The variety of community events covered by this channel is really amazing. Just to take the programme for a few days next week one would see:

• Your City, Your Ideas (coverage of Victoria's first Urban Conference dealing with the downtown core);

• Chamber of Commerce Presents (Mr. Jim Kinnaird, President of the B.C. Federation of Labour);

• Money Talk (financial matters discussed by experts);

• Cable 10 Sports (Victoria-Esquimalt Midget Hockey);

• Music Victoria (students from the Victoria Conservatory of Music);

• Arts Calendar (members of the arts community are interviewed by Erika Kurth);

• Tuesday At Nine (synagogue refurbishing and the Women's Centre);

• Current Affairs (interesting personalities are interviewed by Hassan Sunderani);

• Pets Galore (grooming is the topic by the Island Cat Fanciers Association);

• Canadian Forces Pacific (a film entitled Full Speed Ahead produced by the Canadian Forces Base in Esquimalt).

I could go on but I believe this adequately points out the broad range of topics and interests covered on this lively channel.

With all of the above events we still hope to leave some room for the introduction into British Columbia of pay television. But this is a topic in itself.

BENEFITS TO BRITISH COLUMBIA

I have talked very specifically about Victoria. Obviously there are many other things that we are doing that will benefit the Province.

• We are purchasing components for our rebuilds in British Columbia where possible. A recent order was placed with Century III, a manufacturing plant in Vancouver.

• We are pushing ahead with the film production fund, a portion of which will be spent with British Columbia's growing film industry.

• Next year we will start producing a series of musical specials to expose the talents of young musicians in British Columbia.

VICTORIA REPRESENTATION

Finally, I should point out that Victoria will be well represented on the new Board of Directors of Premier. Ian Stewart has already been appointed to the Board. We have in mind a future draft choice to be added before the end of December to add to the input that the Victoria community will have on the future developments of the Premier systems in British Columbia.

We are all very sincere about wanting your input in how we can improve our service to Victoria. I would be very pleased to discuss any ideas you may want to raise at this point or at any time in the future.

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VICTORIA COMMUNITY TALK

COCKTAIL RECEPTION, CRYSTAL GARDENS
VICTORIA, B.C. OCTOBER 22, 1980

Ladies and Gentlemen, the Crystal Gardens is an ideal place for a reception like this. It combines the old and the new - a reminder of a great past in this great city and also a demonstration of what Victoria is doing to ensure it has a great future.

Our purpose in getting together this evening is to give you an opportunity to meet the directors of CCL and Premier.

We are truly interested in what you feel we can do to make the Victoria Cablevision system even more responsive to the needs of the Victoria community. At other events I have outlined some of our plans and copies of my remarks are available so that we can minimize the speech making on this occasion.

I hope you will use this opportunity to pass on to us any thoughts you have on how we can make the Victoria cablevision system one of the best in the world. It is vitally important to us that we understand what you want.

In the meantime, thank you for being such a wonderful community in which to serve.

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VANCOUVER AND FRASER PROGRAMMING RECEPTION

OCTOBER 23, 1980

I am very pleased to welcome you to this 'thank you' party. It is not often we get the opportunity to get all the community programming people together so that we can express our thanks for the marvellous job you have been doing.

I have a special affection for the Channel 10 group in Vancouver of course because I seem to be one of their regular subjects at conventions, on talk shows or taping my fireside chats. On these occasions I have been consistently impressed with the high quality of the production, the professionalism of the staff, and above all their consistent good humour.

I get constant reminders of the work that the Channel 10 group do and it is always a pleasure to hear the compliments about our coverage of the BRIC Annual Meeting, the Schrum Game or our own CRTC Hearing.

One way of saying thank you to all of you is to keep this talk very short 1 But I did want to tell you that over the past two or three days we have had all kinds of meetings in Victoria and on the mainland to explain to everyone just how committed we are to living up to or exceeding all the promises we made when CCL and Premier were allowed to merge into the world's largest cable television company.

In particular in the area of community programming we are well along the way to splitting up our studio operations by opening separate facilities in Burnaby and Richmond. We are looking into what is required to provide better coverage of the Vancouver City Council. We have already ordered the equipment to split the signals so that we can independently serve the municipalities adjacent to Vancouver while still providing an integrated community channel network for matters of broad interest. We are actively looking at a location for a new studio to serve the Vancouver area.

All this adds up to a continued commitment to the community channel concept. We intend to continue to show that Channel 10 is an operation of which we can all be very proud.

Thank you for all your efforts in making this possible.

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MUNICIPAL, BUSINESS AND ARTS COMMUNITIES

LOWER MAINLAND, B.C. OCTOBER 23, 1980

I am particularly pleased to welcome you all here for a short discussion about some of the plans that Premier has for subscribers in many of the municipalities in the Lower Mainland. This is certainly a topic which is getting well aired these days. I was on the Gary Bannerman Show the other day and one caller said that if they heard one more word about all the wonders of cable television, earth receive stations, etc., they would throw their set into False Creek!

But we cannot get away from this rapidly developing phenomena. The average Canadian family has his television set turned on about 6 hours a day. This does not mean of course that one person watches 6 hours of television, but various members of the family will be watching various programmes that appeal to them for about this length of time.

With over 90% of the television viewers in the areas served by our subsidiaries already on cable, I believe that cable companies have a responsibility to improve the quality and variety of the programming available to you.

Now that Canadian Cablesystems Limited and Premier Communications Limited have been allowed to merge, we can bring to bear the combined experience of the companies on improving our services to you. Together the two companies are likely the world's largest cable television operation with over 1.3 million subscribers. We at Premier are proud to be part of this aggressive new Canadian organization.

I might add that the reason for our being here today in particular is that we made a promise to hold our first meeting of the combined Boards of Directors in the West - what I hope will be the first of many. We did just that by holding the meeting of the CCL Board yesterday in Victoria and the Premier Board today in Vancouver.

The two companies made a number of other promises. We are fulfilling these as rapidly as we can. Today is a good opportunity to review some of these with you:

1. Repatriate the Ownership

Just to show that there are other things beside constitutions that can be brought back to Canada, we promised to bring the control of Premier back to Canada. This we have successfully done. The partial ownership of Premier by CBS in the United States has now been returned to Canadian hands.

2. Expand the Plant

Vancouver has a long and proud history in the cable industry as it was one of the first major cities to be extensively cabled. As you are likely aware, however, this did leave Vancouver with a reliable plant but one which was ageing and had relatively low capacity compared to the newer operations in Canadian cities and elsewhere. We promised in a two stage process to first increase the number of channels that would be available to viewers in the Vancouver area from 17 to 24, and I am pleased to say that this interim rebuild is already underway.

We expect to be able to meet our objective of having this in place by the end of 1981. In a moment I will describe some of the potential uses for these new channels.

We further announced, however, our intention to expand the capacity to a minimum of 36 channels by December 1985. More important, we announced our intention of making the system even more reliable than it is now by making it fully two-way. This two-way capability allows us to monitor the status of the whole system so that we do not have to rely on our clients to tell us when or where there may be a problem.

As I will describe later, there are other advantages to having a two-way system. But for a moment let us talk about what we can do even in the interim to provide more choice to Vancouver and to the systems served by our Fraser Cablevision system.

3. New Channels

Education. We have assigned Channel 18, which is sometimes known as E (for Education of course), to the Provincial Government who are themselves planning to provide 2-3 hours of education programming per day for the early part of next year, with a fuller schedule to be developed throughout 1981. This will be provided under the auspices of the KNOW organization of the Provincial Government. I will, however, leave it to Dr. Walter Hardwick and others to make the detailed announcements in due course.

Transportation. It appeared to us that we could provide an excellent service by providing flight arrival and departure information for the airlines, with an emphasis on any problems that may be occurring. The same could be done for ferry sailings, trains, or even highway data. We are now working to develop a very meaningful channel of information in this area.

Environment. Travellers, boaters, fishermen and many others depend on constant up-to-date specialized weather information. We believe that we can provide this not just on a local basis but also with constant updates on the provincial and national weather scene, possibly utilizing satellite photographs. We may not have all these features on day one, but we are working closely with computer and data processing firms in Vancouver to develop some of these new features.

Financial News. We are not just talking about stock exchange quotations, but possibly the provision of complete business and investment information services from sources such as Reuters.

Consumer Channel. CCL has established a most helpful comparative shopping channel in the East. We hope to combine this with other useful information dealing with health, exercise, diet, menus, budgeting, community events and other consumer information.

Broadcast Repeats. CCL has always been very sensitive to the need to provide more exposure to the best of Canadian productions. We plan to dedicate a channel to the rebroadcast of Canadian programming so that more Canadians will get a chance to watch more of what their own country creates.

Expanded and Improved News Service. We envisage that this will be a replacement for the current Broadcast News Service with more emphasis on local news and hopefully improved graphic presentation.

Additional Station. We understand that a new station, using the familiar call sign KCPQ, will start broadcasting from the United States sometime this Fall. The fare they will offer will be quite different from that provided by the regular U.S. networks or PBS. We expect that we will be allowed to carry this to our Vancouver subscribers.

TV Listing. With all of the new channels we also plan to have an electronic TV guide, so that through your television set you can get a preview of what is coming up on all these various stations.

Our aim is to have channels such as the above available to our viewers by the end of 1981, subject of course to CRTC approval. We have already applied for approval to add such new services.

4. Making it All Easier to Use

It must be obvious of course that to access all these new channels a subscriber would have to have a converter. As you know, most TV sets now have a rotary dial that only allows access to 12 TV channels. For anything beyond this one needs a special device allowing access to 36 or more channels.

We expect that many new models of converters will be coming out in the next few years. To make it easier for our subscribers to obtain these we plan to launch a converter rental programme. This will give a subscriber the option of either purchasing his or her own converter or renting the device by paying for it on the regular cable invoice.

5. B.C. Parliamentary Bureau

Our approach would be to establish a Parliamentary Bureau in or near the legislative building which MLA's could conveniently use to tape or broadcast live whatever comments they may wish to make directly to their constituents via cable. We believe the MLA's will like this feature as it gives them a way to express directly to their constituents their views on new matters of local interest.

We are not talking about coverage of the B.C. legislature itself, although this is something we have had discussions about with the Provincial Government. We are, however, planning to change the current House of Commons channel and add to the present programming presentations or discussions by members of the B.C. legislature.

We have so far received enthusiastic support for this concept from all parties and are at the moment working to finalize the details.

6. Purchasing in British Columbia

We indicated that wherever we could we would purchase components for the rebuild or ultimate over build of the system in British Columbia. We are pleased to say that we placed our first order for equipment with the Century III organization in Vancouver just a few weeks ago.

7. Research in British Columbia

We also indicated that we would develop a research facility in British Columbia and locate this in a Discovery Park. We have already started recruiting for this expanded research and development function. You may have seen our ads in the paper several weeks ago. We have not yet made a final choice on a Discovery Park location as the Foundation is still wrestling out the final details with the municipalities or educational institutions involved.

7. Community Programming

I hardly need remind this group of the job Channel 10 does in the communities we serve. They even show up at events where I did not realise they were planning coverage. It appears that I will be next year's United Way Campaign Chairman and therefore attended the very enthusiastic Schrum football game last Friday evening. Sure enough Channel 10 was on the job and will rebroadcast the game for those who could not attend.

Our plans are well under way for the establishment of separate studios in Burnaby and Richmond. Part of the interim rebuild will be the equipment necessary to split the programming capability so that we can serve the surrounding municipalities on a stand alone basis as well as tying them into an overall community channel network for matters of general interest.

8. Western Representation on the Board

The Board of Premier Communications will form an important link with the communities we serve. We promised to expand the Board to have over 60% western representation. Already 8 of the 13 Board members are from the West and I am pleased to say that at the Premier Board meeting this morning we approved the expansion of the Board to 16 with the 3 additional members all being from the West. This will more than meet our undertaking. We have also greatly improved the representation on the Board and will have two representatives from Victoria, one from Whonnock, one from Surrey and several from the Greater Vancouver area.

We committed to many other proposals that would be of benefit to British Columbia.

We committed to financing 10 music specials to give exposure to new talent in British Columbia. These will be started next year.

We are already setting up a film production fund, part of which will be spent in B.C. to promote our growing film industry.

We committed to provide a satellite uplink to help B.C. talk to the rest of Canada. As the CRTC pointed out, this is something we may not be able to do directly ourselves, but we are still planning to meet this commitment possibly on a joint venture with another organization that has the right to install an uplink.

There are many other things I could tell you, but perhaps the most important is that we truly want to establish a good dialogue with the communities we serve. Ultimately, you are the people who can best help us to help you. We are interested in your opinions or thoughts at any time and look forward to working with you to give Vancouver and the Lower Mainland truly world-class cable systems.

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FREEDOM TO CHOOSE

THE ROTARY CLUB OF VANCOUVER

JANUARY 25, 1983

"Hell hath no fury like a woman porned."

We were looking for a high profile launch for Pay TV which as you know begins on February 1st, at least in its Canadian version. The publicity that has surrounded Pay TV in the last ten days has led to some suspicion that I have been offering to paint the picket signs and pour the tea for anyone willing to protest. This is of course not so - only because it has been entirely unnecessary!

All you have to do is take a good measure of sex, cinema and censorship, add the media who are having a dull week anyway, and you have a public relations bonanza.

All levels of government have commented - often coming down on both sides of the question within the same paragraph. This has led to a series of very collectable and quotable observations.

Pat McGeer who has been solidly on the side of an open skies policy - if you don't want me to receive those signals, don't let them fall in my back yard - suddenly decided that a Canadian cable company carrying the same material was not going to be acceptable. I can only gather that he must feel it is acceptable for Canadian men to watch American ladies in the buff, but not for us to sneak a peek at our own local ladies.

Francis Fox has been pushing for Canadian content. Now that First Choice has agreed to spend $30 million producing Playboy-type films in Canada, he is in a dilemma. I gather bunnies in beaver coats wearing maple leaves in place of fig leaves are not quite what he had in mind.

Maude Barlow, Director of Ottawa's Municipal Office of Equal Opportunity for Women, obviously is thoroughly enjoying the issue. After a demonstration in Ottawa she said, "a fun day - power is wonderful."

Actually, if one can keep one's sense of humour, it has been a fascinating week. I have been variously asked if I had umbrella marks on my head, whether I had changed my name to Hugh Fierheller, in deference to Hugh Hefner, and whether my plans for next week were, "boobs on the bunny tube, or bunnies on the boob tube."

Behind all this, however, are some issues that should be looked at.

THE ROLE OF CABLE IN PAY TV

It should first of all be understood that the cable company acts as a retailer for a variety of broadcast or other services. We provide the electronic shelf space for products that are made available nationally or locally. Only in selected instances do we produce material ourselves.

In the case of over-the-air Canadian television or radio broadcasting we are not allowed to alter what the broadcaster chooses to put forth. In the case of programming imported from the United States we do not alter its content, but we are required by CRTC regulation to replace an American signal with a Canadian signal when both are carried at the same time. This. I might add, is not as unreasonable a requirement as one might think. As the Canadian networks pay for the privilege of broadcasting the American material and reasonably should give the Canadian advertisers full exposure in the markets they have paid for.

In the case of Pay TV, our contracts do not allow us to alter the programming being provided. National advertising would become impossible if each cable company juggled around the content of a Pay TV programme producer.

Therefore, we are in the middle between the producers and the public.

This does not of course remove responsibility from us as a broadcast receiving undertaking not to contravene the Criminal Code. But there is nothing in our licence that would allow us to be a censor of material that we simply felt might offend one group or another.

In fact, the cable company has gone out of its way in its community programming, where we do in a sense act as producer, to ensure that all points of view are represented. I can assure you that some of these, such as Cablevision, receive even more comments than anything we have received on the proposed Playboy material.

I have taken the stance that as I am not a publicly elected official. I do not feel it is appropriate for me to decide what you as the viewing public may want to watch.

The dangers in such unilateral censorship, in my opinion, far outweigh the potential problems created by some material that some people might feel is inappropriate.

One of the claims made by a number of women's groups is that the Playboy material tends to stereotype women. This may well be so, but if I were to eliminate all such material for that reason I would then have to ensure that Porgy and Bess was never played on cable, as this tends to stereotype our black fellow citizens. I could certainly not play M.A.S.H. as this stereotypes the military. Dallas would be out as this stereotypes the business community.

If the concern is about what is erotic and what is pornographic, then I can see pressure being brought to eliminate movies such as Last Tango in Paris. Or we could be asked to discontinue Empire on CBC. Or, as happened in Sweden this week, I might be asked to ban E.T. on the grounds that it was not suitable for children.

I was very pleased to see that a number of major feminist groups disagree with the radical approach of the few and see the broader issues.

THE FREEDOM TO CHOOSE

A second major point to understand about the role of the cable companies is that what is offered through Pay TV is a discretionary service. In a word, if you do not like what is being presented you do not have to watch it. And you do not have to pay for it.

This is quite different from conventional broadcast television. As I have pointed out on many occasions, Pay TV is not a good description of the new programming you are about to preview. All TV is Pay TV. You pay for the material you watch from the networks every time you buy a product or service. It is only through the advertising revenues that these programmes are supported. On a totally involuntary basis you pay for these every time you buy a can of peas or a new car. You pay whether you enjoy, or even watch, the programming.

Then there is the CBC. Here again, you pay on a non-voluntary basis through your taxes. The CBC budget runs over $800 million per annum and very little of this is recovered through advertising.

Only PBS gives you an opportunity to watch programming which is partially supported by sponsors, i.e. by you indirectly when you buy the sponsor's product, but which is partially supported by voluntary donations. Here you might get a bit of free TV if you choose to watch without contributing. I might point out, however, that over 40,000 households in the Lower Mainland and on Vancouver Island do support PBS each year through donations - a form of voluntary Pay TV.

My point in reminding you of this is that the thrust behind the current Pay TV is that it is totally different for it is completely discretionary. If you like what is offered you can pay to see it; if you do not, you don’t have to take it or can stop paying for it at any time.

For the adult material being offered on First Choice, your cable company is offering a further discretionary device, on the assumption that you may like much of what First Choice offers, but do not want to have young people, baby sitters, or others watch certain types of material. We will supply at cost a key operated parental guidance device which allows parents to turn off the access to Pay TV at their discretion.

This is our approach to the issues raised over the past week or so. It is fully within anyone's discretion to take any or none of the channels offered. We are further offering a low cost discretionary device to allow even a portion of any of those channels to be cut off.

Beyond this we do not feel it is within our mandate to act as censors. We are not going to decide for you that, should you so choose, you cannot watch the sort of material that you could buy in the form of a Playboy magazine on any newsstand in British Columbia.

Penthouse is the second largest selling magazine from newsstands in Canada, next only to TV Guide, Playboy is not far behind. As Canadians dedicated to the freedom to choose you have already decided what is acceptable. Adult movies, at a comparable level to the material found in Playboy magazine, shown after midnight on Friday and Saturday nights can hardly be called irresponsible.

I do not believe that the electronic media when offering totally discretionary services should be subject to a different set of regulations than the print media, which is also offered on a discretionary basis for a price.

If this is not the wish of the public then they should express their feelings by not taking the material in question, or by working through their duly elected officials to change the laws governing censorship.

Vigilante groups with their own concept of what an acceptable level of morality should be have ample freedom to express their own view. However, they should not be allowed to unilaterally deny others the right to view or read and then make up their own minds.

BESIDES THERE IS SOMETHING ELSE

In any case, this issue has clouded the fact that what we are offering on February 1st is a wide range of fine entertainment. For those who enjoy PBS-like programming I would encourage you to look at C-Channel, this channel will offer the best of foreign films - often material that has won festivals but has not often been available in local movie theatres. It also provides the best of theatre, opera, ballet and music festivals of all types. In many cases these will be Canadian productions of the highest standards, To assure you that we are endeavouring to offer a full range of programming, I am pleased to remind you that during appropriate hours C-Channel will also provide high quality children's programming. The ratio will be about 40% film, 40% special productions and 20% children's programming.

A second channel will be of particular appeal to the multicultural communities that exist within our province. World View is a local B.C. company serving only the Lower Mainland at the moment. Its programming will be provided in Chinese, East Indian, Italian, German, Scandinavian and Japanese. Before you feel that this channel may be of no interest if these are not your native tongues, you should be aware that many are presented with English sub-titles.

World View will also be bringing the best of international television providing a fascinating window on the world. They also plan to provide international sporting events.

Finally, this brings us back to First Choice. While all the emphasis in the past ten days has been on the Playboy programming, First Choice will offer twenty-four hours a day access to first run movies and specials unavailable elsewhere. During the first month, twenty-one outstanding films will be presented, as well as four specials and a Boxing Match of the Month. As with all the Pay TV channels, this fare is offered uncut and without advertising.

With all of the pay channels, material is repeated so that you will have a good opportunity to see all of the fare offered at times convenient to you.

The cost per channel is $15.95 per month for each of First Choice and C-Channel and $16.50 for World View. However, discounts apply when two or more channels are ordered.

As you will undoubtedly also have read in the newspapers, you do require a suitable external converter to work with your television set. A converter is obviously required because the Pay TV channels are in a part of the spectrum beyond the reach of the tuners of many TV sets. You may already own such a converter or you can lease one from the cable company for $4.50 per month. In either case, the descrambler is so easy to install that you can do it yourself thereby reducing the installation charge to $16.50 on a one-time basis. I might add that the criteria was that if the president could install his own - then anyone could do it!

SUMMARY

We used to use a motto called Freedom To Choose.

I still believe this is what constitutes the basic product of the cable television industry. I hope you will enjoy the previews being shown on channels 22, 23, 24 and 25 over the next few days and will enjoy this new medium of home entertainment.

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ANNUAL GENERAL MEETING OF CANADIAN CABLESYSTEMS LIMITED

TORONTO. JANUARY 26, 1981

Ladies and Gentlemen: This is the first opportunity I have had to speak to you as shareholders of CCL since the merger between CCL and Premier. For that reason I will give you a bit more background on the Premier side of the operation than will likely be required in subsequent years.

First let me tell you how pleased we all are to be part of the CCL family. I am also pleased to be able to report that the integration of the two companies where required has gone very smoothly.

We saw the advantages of the move:

• a balanced East/West presence in the cable industry in Canada;

• a pooling of the ideas and people to make the combined organisation one of the strongest forces in the cable television industry anywhere.

The fact that we are such a large factor in the industry means that we are expected to lead by providing new ideas and new developments. This is the challenge we face, and one that I believe we are meeting.

Let me outline something of the Premier operations to give you an idea of the many things we have underway.

OPERATIONS

Victoria

Victoria is a mature cable system with about 75,000 subscribers. Revenues are running at over $5,000,000 a year, with a profit after tax of about $760,000 expected. The company has over 90% penetration in its marketplace.

One of the unusual features of Victoria is that it has one of the lowest rates of any cable system of its size in Canada - $5.25. Obviously, there is substantial room for improving the earnings of Victoria, but with that kind of penetration this can only come from new services and from rate increases.

Leaving aside the outlook for pay television, we are concentrating the perceived value of our service to the subscribers in Victoria:

• we are adding a number of new services, including a shopping guide, weather information, a financial channel and a TV guide;

• we have recently announced the opening of a Bureau in Victoria to provide an opportunity for members of the B.C. legislature to report directly to their constituents;

• we have offered to assist in the provision of coverage of the B.C. legislature;

• we are planning to be able to add live coverage of major events in the Victoria area on our community channel;

• we have applied to the CRTC to add a new U.S. station, which we believe would be attractive programming for the area.

One of our aims will be to improve the community awareness of the many fine services offered in Victoria. To assist us in this we will be pleased to welcome Glenn Terrell, the new Manager, who takes over in the middle of February.

Finally, with these many new services to be offered in Victoria, we believe it is appropriate to apply for a rate increase and although the amount has not been finalised, an application will go in shortly for this.

Vancouver

This is also a well established system, with over 90% penetration. Vancouver has over 245,000 subscribers providing an annual revenue in excess of $17,000,000 and an anticipated after tax profit of about $1,750,000.

We are taking the same approach here as in Victoria. Vancouver is generally regarded as being a stable system technically, but we must improve the perception of the services we provide and must of course continue to improve these services.

In addition to adding about half a dozen new channels as we are planning in Victoria, we are also going to add two new studios from which live broadcasts will be possible. One will be in Burnaby and one will be in Richmond.

We are further planning coverage of events at City Hall in Vancouver which should be of great subscriber interest with the many lively happenings in that dynamic city.

As you know, we have undertaken to expand the plant. By September 1st the plant should be a 24 channel capacity and there will be an estimated capital expenditure of approximately $4.3 million for this in this fiscal year. The plant will be further expanded by December 1985 to at least 35 channels.

Last week we submitted a rate increase application to move our rate from $5.75 to $7.00. If one were to look at the impact in a full year, and this would not have any effect on the 1981 fiscal year, the increase in revenue would be substantial, e.g. $3.75 million in one year. Of course, not all this will drop through to the bottom line as our expenses are going up rapidly as well, but this is a substantial increase in what one might call the plain old Cable Service alone.

We were also pleased to add Dave Smith as the new General Manager for Vancouver last Fall.

Fraser

Fraser is a long system covering over five major municipalities up the Fraser River valley. The system has 47,000 subscribers, with an annual revenue in excess of $4,500,000. Because of the scattered areas serviced, the profitability of the system is still low and will probably be in the area of $180,000 this year.

We have already applied to move the rate from its present $7.00 level to $7.75 and this will be heard at a CRTC Hearing in April.

Fraser also has a new General Manager, Bruce MacCormack, who joined the system about a year ago.

Western Cablevision

An Agreement has been signed, subject to CRTC approval, for Premier to increase its holdings of this company from 45% to 87.5%. The McDonald family, who have successfully managed this cable company for many years, decided to sell and Premier had a right of first refusal which of course we felt we had to exercise. I am pleased to say, however, that Steve McDonald the long time President of the company will remain as a shareholder of Western and will continue in the management of that company.

Western covers the Surrey area of B.C., which is a very attractive growth area. We believe we will be able to expand the services offered to the residents of Surrey by sharing these with Premier. This should have the effect of keeping the costs down, while standardizing the services available in the Lower Mainland of B.C.

At the moment, Western has revenues of about $7,000,000 with a profit after tax of about $900,000. Western already has over 60,000 subscribers.

An application has just been filed to move their rate from $7.25 to $8.00.

Alberta

The Community Antenna Television organisation in Calgary also has about 60,000 subscribers. This company, with revenues in exec

of $7,000,000 and profits expected to be in the $720,000 area, just received a rate increase to $7.75, although this does include about 50 cents for microwave costs. CATV will also apply for another rate increase very shortly.

You will note in all these systems that we are taking the approach of applying for regular rate increases as we expand and improve the services offered, and to keep pace with mounting operating costs.

We also believe there is substantial potential in all these Western systems for converter rental revenue which we have not yet launched in a major way.

United States

As you may know, Premier has developed an over-the-air pay television operation in Portland, Seattle, San Francisco and Sacramento. This non-cable approach is known as MDS, or multipoint distribution service.

At the present time we have over 38,000 subscribers, although, as we have 50% partners in some of these operations, the net subscribers for Premier is about 24,000.

At the present time we are considering how these operations can best be integrated with cable where we could be involved in both cable and over-the-air pay TV operations.

Ireland

Our operations in Dublin and Waterford continue to be successful contributors to the bottom line. We have over 74,000 subscribers between the two systems generating a revenue of about $4.2 with a contribution to net profit after tax of about $435,000.

The Irish systems are prospects for pay television as well.

United Kingdom

Recently the Home Office announced the granting of 13 licenses for pay television operations in the United Kingdom. We are currently negotiating with a couple of organisations who have cable licenses now, with the intention of becoming a partner in what could be a very attractive new market in the United Kingdom.

OUTLOOK

I am very optimistic about the outlook for our current operations and the potential for adding new services. I believe that the CRTC now recognises the necessity of allowing the cable companies to develop into retailers of a range of services beyond the normal definition of broadcasting.

As we have said on several occasions to the financial community, the going-in costs to position ourselves for new franchise areas and for new services will be high. We have no doubt, however, that the market for new in-home or in-the-office cable services is immense.

We understood that we needed the size to be effective and to be able to compete in international markets. Those in the Premier organisation are very pleased that this has been achieved and are enjoying the challenge of working with the very dynamic CCL organisation.

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YOU TAKE THE HIGH ROAD:
AN OVERVIEW OF CABLE TV AS A FUTURE MARKET FOR SATELLITE SERVICES

THE MANAGEMENT GROUP OF TELESAT CANADA

OTTAWA. JUNE 28, 1983

Later this summer Telesat, the cable companies and the CBC will be cooperating in a project to bring the proceedings of the World Council of Churches to Canadians and our friends around the world. In trying to define responsibilities for this project I concluded that the cable companies could handle everything up to 100 feet or so above the ground, Telesat could take responsibility for everything from there up to 25,000 miles but beyond that it was strictly up to the clerics.

The cable industry has been working closely with Telesat with Telesat taking the high road and the cable companies taking the low road a little closer to the ground. If we do the right things together we could arrive together at a mutually productive and profitable future.

In general, the cable industry has been at least once removed from being a direct purchaser of satellite services - at least in Canada. However, I believe this will change and therefore it is important that we discuss together the cable industry as a potential market for transponder time.

A BIT OF HISTORY

As the down to earth partner in bringing new services to our subscribers, the cable industry has become a major user of transponder time in North America. Some satellites, as you know, are almost entirely dedicated to pay television or other cable subscriber services. In these cases the cable company acts as the retailer. To a large degree, therefore, your success goes hand in hand with ours.

In Canada the cable industry has attempted to contract directly for satellite time. As you may recall, the industry established the Cable Television Satellite Network (CSN) with the aim of leasing a transponder to carry the Galaxie children's programming across the country. This programming is created by TV Ontario.

Our application to do this was denied by the CRTC on the grounds that this would be networking by a cable company and might have an adverse effect on the broadcast industry. I am sure I need not remind you of the problems facing a developing new industry such as the satellite/cable system when confronted by a regulator who however well intentioned is operating under a broadcast act that is woefully out of date.

The CRTC tends to define the broadcast industry as being primarily the over-the-air television or radio broadcaster and considers Telesat or the cable companies as being essentially carriers. In any proposal to provide new services the first consideration always seems to be protection of the past.

Again, I need hardly remind a Telesat audience of the recent CRTC decisions on not allowing stereo broadcasting for Canadian Pay TV other than in a limited fashion, the disallowance until recently of Telesat's thoughtful offer of ballooning payments for Canadian Pay TV, and similar matters. While I would not say that the demise of C Channel and hence the loss of revenue to Telesat is solely a result of these kinds of decisions, clearly they had a devastating impact on a struggling new commercial enterprise.

The fundamental problem that both you and we face is a regulator obsessed with the development of Canadian production facilities and the carriage of Canadian content. It is not that any of us are against this. However, the non-commercial approach taken by the regulators leads to situations where nothing will be financially viable, and hence there will be no money to put into Canadian production or adequate facilities to display Canadian production. You simply cannot get milk from a dead cow and this is what the regulator does not seem to understand.

For our part, the cable industry is quite prepared to have a tax or other subsidy applied to the development of new Canadian film or TV production facilities. We may question the way the particular tax is applied, and certainly feel it is a mistake to apply it on a brand new service such as Pay TV. However, in principle, we are not opposed to initiatives that will help in this area, but together all of the companies operating in the communications business in Canada are going to have to impress on the CRTC that a tax is useless unless there are revenues and profits, and that the regulator simply cannot have it all ways.

Our long stated objective has been to support Canadian production with dollars and reasonable exposure, but Canadian content rules applied on a mathematical basis only cause increasing customer dissatisfaction as Canadians are forced to watch less than adequate Canadian programming. We would prefer to see less programming produced but world class programming. It is just not reasonable to expect Canadians to produce enough programming to fill your satellite or our cable when we have only one tenth the population of the United States. We would be far better to push for quality programming that could become an export item and then leave the cable retailer to market what the public will buy so that we can afford to put the proper dollars into Canadian production.

LOOKING FORWARD RATHER THAN BACK

But that is enough history. It would be more helpful to look at what cable sees is the future of its industry and how this relates to satellite needs. I have already spoken of cable as being essentially an electronic retailer. In the past we have tended to retail only services produced by others, e.g. over-the-air broadcast television or fm, or more recently satellite delivered Pay TV. I believe this is changing.

If you look at the future of cable you might examine it in four broad areas:

1. Entertainment

This is a highly competitive area. The viewers have many alternatives including video tape, video disc, off air reception, direct broadcast by satellite (DBS), or simply going to the movies or a football game. Even reading a book is an alternative use of discretionary viewer dollars.

It is therefore important that we continue to have the flexibility to experiment in new types of programming. Pay TV is a start. However, a non-advertising supported Pay TV operation has not yet demonstrated that it can be a financial success, with the exception of major movie channels. As you are aware only HBO and Showtime have after many years actually demonstrated a good bottom line.

It is clear that the viewing public would like more specialty channels, e.g. an all sports channel, music channel news channel or a life style channel. However, as these channels are available by satellite it is essential for the cable industry's survival that we be allowed to deliver the same type of programming. It is unlikely that these U.S. delivered satellite channels will ever be scrambled as they are advertising supported. We will be proposing that the cable companies or others be allowed to take these American signals from the U.S. satellites under contract, Canadianize them and possibly allow Canadian advertisers to buy advertising space to replace American commercials. The signals would then be sent out from our head ends through the cable network.

This form of tiering would provide desired signals which could either be packaged with our pay signals to improve penetration, or could be provided on stand alone tiers.

The implication for Telesat is that if reasonable arrangements could be worked out, it might be feasible to uplink some of these signals again in Canadian in their Canadianized form. Initially, however, we doubt the economic feasibility of doing this.

That is in the near term. Looking a little farther out, the cable industry is going to be faced with some very interesting problems which we hope to turn to potential. you are all aware of the impending intention of U.S. broadcasters to start broadcasting TV signals accompanied by full stereo sound. This will have some implications on the requirements for satellite capacity, as Canadian broadcasters will clearly have to follow suit.

You are also, I am sure, aware of the high res television. This move to convert television density from 525 lines on the screen to 1125 lines will have a major impact. It may move the standard television bandwidth requirements from 6 MHz to 10 MHz or beyond. It is going to require close coordination between Telesat and the cable industry to ensure that this move means not only better service to the clients but profit to us without the disruption that running a two standards system could easily imply.

Further if the above trends to increased narrow-casting i.e. specialty channels, continues the requirement for additional satellite capacity will be enormous. again, the economic feasibility of this will depend on the regulator allowing a mixture of advertising and subscriber fees to support such programming, and hopefully the reduced cost of satellite time as the space shuttle and technology combine to reduce the cost of transponder time. It is with some regret with this kind of future in front of us that I hear some rumblings from Telesat that they may be unable to complete their current launch series.

2. INFORMATION

Moving on from entertainment, another market area we foresee is information in various formats. We already provide what looks like an electronic newspaper on many of the Rogers' cable systems. These have all the elements of an alpha numeric news channel. weather channel. financial channel, TV listing channel, consumer news channel etc. These are all the elements of a daily newspaper, although we have not formatted them in a way to make this really a saleable feature.

However, all of these suffer from the same problem. They are essentially passive. I believe that it is only with the development of inexpensive interactive information systems that this field will really grow to be of any significance. This raises an interesting marketing problem for Telesat. Essentially for the home user satellite is a one way street. With all the talk about DBS and its impact for the home market, the real hurdle is finding some way of interacting back through the satellite for a wide range of new services. I will be most interested in your opinions but I believe the opportunity for inexpensive uplinks are many, many years in the future, if ever.

This implies a forced interaction between the satellite and the cable or other land communications. Here is clearly an area where close cooperation will be required. I am less optimistic about the short range economic impact of teletext or other essentially passive services than I am with the future of interactive services. This is clearly an area for cooperation between Telesat and the cable industry.

3. EDUCATION

Although this might be considered another form of information delivery, I add this as a potentially important service for cable and satellite in the next few years. It is trite to point out that the changing technological scene will require massive adult retraining in the years to come. If we do not want to move people for all the obvious reasons, we may have to move education to where people are. One of the interesting potential proposals for tiered services is a national education network using satellite. The backers of the Knowledge Network of the West, Access, TV Ontario and others are looking at such a national service.

Again, however, this will only be really effective if there is a high degree of interactivity and this is going to require some imagination if satellite is going to play a two-way role.

4. SERVICES

There are endless services that may or may not have an impact on satellite technology. but clearly will on cable services. These include in-the-home security, meter reading, in-the-home shopping, telebanking and the whole litany of Wired City services.

However many, like electronic mail, could have a satellite impact, as message handling is clearly a national or even international matter.

WHERE DO WE GO FROM HERE

The New Broadcast Policy announced by the Honourable Francis Fox clearly assigns to cable the role of saviour of the broadcast industry with its contribution to Canadian culture, language and national unity. This is not a role we particularly sought but we clearly understand that neither we nor the government have any alternative. The government has recognised that satellite technology will ultimately make DBS feasible. Satellite signals do not recognise international borders. Therefore the flood of foreign satellite signals could have a damaging effect on any attempts to maintain a Canadian culture. The government therefore views the cable industry as a way of wiring the country together and assisting Canadian broadcasters, Pay TV producers or others to display their wares by helping them through such matters as programme substitution, broadcast repeats or other approaches. If together we are going to develop the potential in this country I believe the following steps are necessary:

1. We must cooperate in convincing the regulator that the cable industry be allowed the flexibility to make its own arrangements for networking such as was proposed with Galaxie. This will mean direct business for Telesat. I would suggest a liaison with Telesat and the Canadian Cable Television Association would be a good place to start.

2. We must anticipate both the capacity requirements and the changing technological requirements that will come about through increased narrow-casting and through the changes involved in stereo broadcasting, high res television, or similar inevitable developments. These have a long lead time in terms of cable plant capacity or satellite capability. Here I would suggest opening a liaison with the Cable Telecommunications Research Institute.

3. Canadian cable companies are active in the United States. With the increased channel capacity available in newly franchised operations there is a desire for additional programming. I would hope that Telesat and the cable industry could work together to convince the government to relax its regulations on the reception of foreign satellite signals.

I believe that Telesat has been an international leader in satellite technology and given a reasonable regulatory break could compete internationally in carrying Canadian signals to the United States. There are a great many Canadians living in California, Florida and elsewhere. I would like to see Canadians offering a Canadian programming package to the United States.

Canada has been a leader in both satellite and cable technology. We can be again if we are allowed to make sensible commercial decisions that are responsive to your ultimate market and mine - the public. Together we must ensure that this is allowed to happen.

Back to Section C Index or just read on

 

ISSUES IN THE CANADIAN CABLE TELEVISION INDUSTRY

January, 1985

THE BASIC ISSUE

The fundamental problem facing the industry is too low a rate of return, no matter how this is calculated, to allow the industry to finance its role to, "become the primary delivery vehicle for conventional and new programming services, as well as non-programming services."

Despite this role as defined in "Towards A New National Broadcasting Policy" the industry's rate of return on net fixed assets, for example, has declined steadily over the past few years. It is now far below a level that would allow it to replace its capital plant, and allow "cable operators to re-tool their plants to carry these new programming and non-programming services."

On the one hand, the new policy states that, "Cable, drawing on satellites and over-the-air broadcasting, represents the most cost effective means of significantly expanding the viewing choice of most Canadians, while at the same time ensuring that the broadcasting system remains identifiably Canadian." On the other hand, the cable industry faces:

• a rate regulation process that has caused charges for cable to drop consistently behind rates of inflation;

• an increasingly competitive marketplace with little protection from the regulator;

• being a mature industry with almost complete market saturation and yet being restrained from expanding sources of revenue through advertising and/or the provision of programming services it produces;

• restrictions on the carriage of services that others produce, e.g. distant Canadian signals, foreign satellite signals;

• being forced to be the government's instrument for carrying out social or cultural policies to the detriment of the sale-ability of the service, e.g. heavy Canadian content regulations in Pay TV.

The statistics provided by the Canadian Cable Television Association which are updated annually clearly substantiate the declining financial health of the industry. While there are many subsidiary issues, the ones requiring immediate attention are those corresponding to the problems outlined above, i.e. those that will have the most immediate effect on reversing this trend.

BASIC CABLE RATES

The industry has been constrained for the last several years by the 6, 5 and 4% policy. This has worked particular hardships on an industry that was already suffering from a slow and arbitrary approach to granting rate increases over the last decade.

The December 12th CRTC announcement of deregulation for Class B and C systems as of September 1st, 1985 is a real step in the right direction. However, Class A systems would still be restricted to a maximum of 80% of the annual increase in the CPI without seeking further approval.

It is the Rogers' position that 100% would have been justifiable, but the challenge we now face is less the percent increase than the inadequate base upon which such automatic increases are being granted. Large systems such as those in the Rogers group will have to make the case that a more rapid rate of increase is required, perhaps phased over several years, to get the base to the point where an 80% of CPI will provide a reasonable return for the cost of basic service.

COMPETITION

As well as obtaining more logical rates for the basic service, the cable industry's next best bet for increased revenue is to sell new services. However, these services are being sold in an increasingly competitive environment.

A large portion of our revenue comes from Multi Unit Dwellings, (MUD's), and it is difficult to be cost competitive with a Satellite Master Antenna TV system, (SMATV). An apartment owner can in many locations receive reasonably good off-air regular TV broadcast signals and supplement these with U.S. Pay TV or Superstation signals, providing an attractive product to the tenants.

It is the industry's position that this competition is very unfair because the apartment owners have none of the requirements of the cable company to assist the broadcast industry through programme substitution, provide a community television channel service, or other such responsibilities. They are not subject to the 6% tax to support the Canadian Broadcast Program Development Fund. Nor are they constrained to carry priority Canadian broadcast signals.

The recent announcement by the government of a stay of prosecution for SMATV users was a blow to the industry which fortunately was modified on December 20th.

It will be important for the Rogers' group to lobby the government for the passage of Bills C-19 and C-20, as within these pieces of legislation are redefinitions of who would be subject to regulation under the Broadcasting and Radio Acts.

In general, the cable industry's position has been to avoid coming out against competition but rather requiring that that competition be fair. It appears the government is intending to define as a broadcasting undertaking any person within Canada who, "transmits or distributes by means of telecommunications any programming received by radio communication." It specifically points out that there does not have to be any charge involved in the distribution. This should allow the government to regulate SMATV situations.

However, the follow-on implementation by the CRTC even if this bill is passed will require constant attention by the Rogers' group.

It should be noted that there are many other forms of competition that will give the cable industry problems. The increasing use of VCR's provides an alternative to Pay TV movie entertainment. Videotapes are not restricted as to their Canadian or moral content. There is little attempt at the moment to prevent copyright transgressions by illicit producers of videotapes.

There is not much that can be done about this except to alert the government that the Canadian competitive situation is changing and the cable industry is no longer like an electrical or telephone utility.

Another competitive threat on the horizon is Direct Broadcast by Satellite, (DBS), which strangely enough is being promoted by the Department of Communications and undoubtedly will be promoted by Telesat to use up redundant satellite capacity.

A further form of competition is Multichannel Multipoint Distribution Systems, (MMDS). These are omni-directional microwave systems used in the U.S. but not yet in Canada capable of carrying a number of premium TV signals. They could also form competition within our licensed areas.

Finally, there have been references by the Minister to increasing the involvement of the provinces in broadcasting and cable. The provinces wherever they have been heavily involved in cable, e.g. Manitoba, have consistently made life very difficult for the cable companies by favouring the provincially-owned telephone companies. In British Columbia the provincial government has readily granted licenses to competitive systems to cable, even to the extent of licensing overwiring of federally regulated cable systems. This is another area where the Rogers' group will have to lobby if we are going to avoid double tiered regulation.

ADVERTISING ON CABLE

The CRTC has consistently come to the defence of the over-the-air broadcast industry even though their return on capital has for years been substantially greater than cable. Any hint of advertising on cable originated channels has been promptly turned down.

If cable companies are to upgrade their plants for the late eighties and nineties advertising could be a most important source of revenue.

Our experience in the U.S. indicates that there are many local advertisers who would be most willing to advertise on cable-only channels. The contention by the broadcasters that this would drain advertising revenue from them has never really been substantiated. Most of these local advertisers could not afford the CBC or CTV rates. The cable industry's argument is that this would be good for the local producers of television commercials and programming, and would be good for the promotion of local businesses, i.e. good for the economy from any aspect.

To date the CRTC has even denied specialized real estate channels on the grounds that this is a form of advertising.

The situation has become so strained that when the CRTC allowed the cable industry to have a barker channel to promote its own programmes, the CAB (Canadian Association of Broadcasters) lobbied to get equal time on our own channel to promote their programming.

A corollory of the above is that the cable industry might get in to the direct production of programming beyond the community channel. The industry has tended to take the position that we would not mind if broadcasters themselves provided some of the programming and directly linked their facilities to the cable network, rather than providing costly over-the-air broadcast equipment for a minimal additional audience.

Again, lobbying for advertising on cable will become an important factor for the next period.

ENHANCED PROGRAMMING SERVICES

There are artificial restrictions now placed on the cable companies as to the ratio of foreign to Canadian signals. At a CRTC hearing on November 27/30 in Hull a proposal to allow distant Canadian signals was heard. Again, the broadcasters objected that this would interfere with local broadcaster viability. In fact, as the Chairman himself said, this was not demonstrated by the broadcasters. The cable industry noted that being able to see an Ontario station in B.C. would in fact be good for national unity as well as providing additional real choice to viewers. In our view such additional signals simply make our tiers more attractive and hence able to command either higher prices or lower the rate of churn. Such new programming signals will require capacity upgrades of the systems. However, such upgrades will be required in any case to handle stereo sound, digital TV or the still elusive High Density TV, (HDTV).

To finance these expansions continual lobbying for additional services will be required.

PROGRAMMING TO MEET MARKET DEMAND

One of the biggest impacts on our rate of return has been the churn in Pay TV. The basis of this problem is the heavy Canadian content required by Superchannel First Choice.

The industry's contention has been that first the government should allow a new service such as this to be a commercial success, and then if necessary take something 'off the top' to be put back into support of Canadian production. What has happened is that we have been charged with the 6% tax referenced earlier, but are still paying the price of a poor product relative to HBO or other American Pay TV programming.

The Rogers' position has generally been that the government should concentrate on quality of Canadian programming rather than just regulated quantity. The latter often leads to poor quality Canadian productions rushed to market to satisfy artificial ratios. This irritates the public and makes our product less saleable.

Hearings are coming up in January at the CRTC on the important Canadian content (Cancon) issue.

SUMMARY

In general, over the past several years the government has expected a great deal of the industry in terms of meeting its objectives of national unity, promotion of Canadian film production, community access and other matters, but has failed to give the industry enough marketing flexibility to allow it to afford to do these things. The squeeze on the bottom line has been the result. This has tended to force Canadian cable companies to look to the United States or elsewhere for a less tightly regulated cable environment. These investments which have not always been successful have themselves compounded the financial problems of the Canadian industry.

The basis of our lobbying should be to restore a reasonable balance between market freedom and meeting reasonable obligations in return for the cable franchise we have been granted. Although conditions under the new Chairman of the CRTC have improved, the system is still far out of balance.