WHEN NBTEL FIRST CAME to market in 1998 with a digital TV product serving customers in Moncton and Saint John, N.B., the cable industry laughed.
Sure, it was all-digital television, but each TV needed its own set top box, channel-changing latency was a problem and due to the limitations of the early ADSL technology it used, all the TVs in the house had to be tuned to the same channel. Fine for homes without a second TV, but not so much for most folks.
At the time, NBTel (which is now Aliant) was the North American leader on the TV-over-twisted-pair front. The company was a risk-taker and someone had to lead, try, and ultimately, fail.
Aliant walked away from that service after a few years and a few thousand customers as it underwent many other corporate changes, combining the eastern telcos (MT&T, IslandTel, NewTel and NBTel) into one company, and coming under the Bell Canada umbrella, too. While this happened, EastLink, the region’s cable company, began kicking sand in the big telco’s face and eating its lunch – local voice customers.
EastLink also showed North America something. That people would love video, voice and data from their cable company and in short order, EastLink claimed a third of the voice market in Halifax.
These are great times in the cable industry. Voice over IP means Canadian MSOs are installing new local phone customers at full capacity. Cogeco Cable, with 830,000 basic cable customers, said this week it is signing on 1,600 voice customers every week. Videotron said this summer it adds up to 5,000 new telephony customers each week. Rogers and Shaw both report similar rushes on voice.
In the face of massive customer losses, North American telcos are swinging back and recently, some have been slamming homers. The negative pitches from cable have been consistent:
* "The telco pipe isn’t robust enough to support very many channels." Whack! Let the engineers argue with me but the switched architecture used makes the telco network, purely from a customer-facing point of view, as good as cable. Cable itself is moving to switched video to deal with the bandwidth constraints of so many services – and a growing amount of HD.
* "DSL TV can’t do HD." Whack! MTS TV has a number of HD channels and SaskTel’s MaxTV customers will be able to choose from 27 HD channels as of November 1st.
* "Telcos don’t know video, and it’s different." Whack! Those telcos have hired a large number of former cable people who certainly know how to market video to Canadians and they are succeeding.
Plus, the telcos have been able to do a number of cool things from day one on their plants, like caller ID on the TV screen, e-mail, web and video integration on TV, offering the customers the ability to shuffle their own onscreen guide so their favorites always appear first, and other interactive apps. With the newest telco TV systems, customers connect up to three TVs on one box, using the wiring in the home to deliver three different signals to three different TV sets.
(And on a note that’s really my own personal taste, the telco TV electronic program guides are much more attractive and elegant than most of the cable and satellite-delivered guides I see.)
This week, all of the active incumbent telcos currently delivering TV over their plants (MTS Allstream, SaskTel, Aliant and Telus) gathered in Toronto to meet with the programming community (most of whom are based here), show off what they have and talk strategy. Northwestel Cable also outlined what it does at this event, dubbed the Telco Entertainment Forum, because, since it’s owned by a telco, Northwestel (which is controlled by Bell Canada) it isn’t allowed to join the Canadian Cable Systems Alliance.
What’s really neat about the nascent telco TV services is that right now, at the beginning of their video lives, they want to be much more than a "me-too" cable service. The execs want multiplatform content built in to take customers beyond digital TV and into wireless and on the web, as seamlessly as they can. "We’re looking for three-screen opportunities," said Kirsten McElgunn, director of product marketing for Telus’ Future Friendly Home. "We’re small right now so we have the opportunity to test some things."
Telus wants to combine its TV and video service so that, for example, its GPS-driven map/directions service or its Kid-Find service on Telus Mobility could be accessed via the set top box as well as the wireless handset and web.
MTS and SaskTel are the largest of the Canadian telco TV companies with 60,000 and 50,000 customers, respectively. In two years, MTS has actually taken half of Winnipeg away from Shaw Cable. MTS TV is only available in the capital of Manitoba. The two companies actually offer a quintuple-play package of services: video; voice; data; wireless; security.
In Saskatchewan, Max TV is available in both Regina and Saskatoon and a number of smaller centres, passing 225,000 homes right now. Of its customers, over 7,000 subscribe to its TV screen caller ID feature. SaskTel estimates it holds 39% of the digital TV market in the province. And, said the company’s Karla Kobitz this week, 60% of Max TV installs are also new high speed Internet customers.
The company says it will launch an HD PVR in 2007.
Despite its early start in TV, Aliant didn’t kick off its new version until mid-2005. Telus TV is a 2006 entrant – so neither company mentioned subscriber numbers (although we heard from a couple of good sources that Telus has passed 4,000 TV customers in Edmonton, Calgary and B.C.’s Lower Mainland). The company is also testing the TV service in its Quebec territory in Rimouski.
"When Telus TV grows up it wants to be like SaskTel and MTS TV," said McElgunn.
Telus us rolling out its TV service neighbourhood by neighbourhood and with over 800,000 broadband customers to aim at first, the company is positive it can make an impact, and quickly. Its marketing efforts have been largely door to door because it passes less than 500,000 homes right now.
Company CEO Darren Entwistle has been adamant that the new service will offer far more than digital cable and Telus TV certainly has features that its competition does not. McElgunn showed off a split-screen channel where on side is a hockey game and on the other are interactive running stat totals for those teams and that game. HD is coming in ’07, she said, the year where Telus will dramatically ramp up the build and sell of Telus TV.
It’s also important to note that none of these services are IPTV, in the Microsoft/Bell sense of the word. "This is not IP," said MTS TV’s Greg McLaren, a video veteran who started his career in TV with Videon in 1975. "IPTV is a few years away yet."
Bell, which has delayed its terrestrial TV launch and is waiting for more robust technological developments on the IP front before proceeding, did not attend this event.
There are more than enough questions surrounding telco TV and its real and imagined potential that I still hear cable operators quietly chuckling as the ILECs try to figure out where they’re going and how fast. And when one looks at U.S. telco Verizon’s decision where the company said that in order to do TV right it has to spend US$22 billion to bring fibre to the curb, one questions whether the capital spending plans of the Canadian telcos is going to be near enough.
But rest assured, the telcos will figure most of this out and these services will only grow. They certainly won’t grow like cable VOIP has, but they will be a strong alternative in the triple-, quad-, or quint-play sphere.
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