THE FOOD INDUSTRY WAS never this exciting, says Videotron president and CEO Robert Dépatie.
In the 1990s, he was in charge of the Planters brand in Quebec and prior to that, held positions with Heinz. The sheer volume of food processing technology was nothing then as compared to what his cable company faces today. The acronyms are endless: VOIP, VOD, HDTV, iTV, IPTV, DOCSIS and so on.
Last week, the MSO launched its own branded wireless service, riding on the Rogers Wireless backbone, giving it a fourth valuable service option and allowing a family’s entire telecom bill, beginning to end, to be paid in one shot, with substantial savings.
After the wireless launch in Quebec City last week, Dépatie (pictured below, right, with Quebecor CEO Pierre Karl Peladeau) talked with Cartt.ca editor and publisher Greg O’Brien. What follows is an edited transcript.
Greg O’Brien: Well let’s start with the wireless launch. I’m curious, why you have decided you need wireless, because a couple of your cable brothers, Shaw and Cogeco for example, don’t feel that’s a needed product. Obviously you feel different and I was wondering why that is?
Robert Dépatie: Well we feel different because if you look at the preference today around the world and more importantly even in Canada and North America, you have two great trends. The one is everything over IP and the other one is everything over wireless.
And we felt – we feel still today – that in order to really make sure that we’re ready for the future we need to be in wireless – for two reasons.
Number one is to make sure that we offer an opportunity for our customers to have all of their products under one roof – which is very important for Quebeckers. And number two, we feel that we could offer a great experience with convergence, not only from a technological standpoint, but from a content standpoint, be part of the Quebecor family, we believe that we can make a difference, we believe we can offer a better product, a product that will suit the needs of Quebecers.
GOB: And at $94.94 for a quad-play bundle, that’s pretty aggressive pricing.
RD: It looks aggressive, but it’s not. If you look at it, we’ve been promoting three products (cable, Internet, home phone) for $69.95… The difference is instead of going with 100 minutes like everybody does (with wireless) and then weekends and nights, we spoke to our customers and th
ey said, "I don’t need that" – except young teenagers – "plus we use only 200 minutes a month. Why don’t you give me a straightforward package at that price and I’ll be very happy." So the price is very competitive, it’s just the package is very different.
The rest, well, we came with a minimum… the minimal package.
Then you have the wireless with 300 minutes and you have the basic Internet. Our experience in the last 18 months with three services, the ARPU went from – with a promotion at $69.95 – to over $97 on average. So the marketing strategy is when you have people calling making sure that they listen to our sales pitch, and they up-sell them, to obviously over 100 dollars.
GOB: A few of the phones have good multimedia capabilities, will you be offering any exclusive Videotron content to the wireless subscribers as well, via their phones?
RD: Oh absolutely. The strategy would be to offer exclusive content. As you know our affiliates like TVA, Sun Media, Canoe, have a lot of packages and a lot of programming, a lot of things are exclusives. We’re going to work with them to really come with different experiences, different programming and different content.
We have (retailer) Archambeault as well, who controls the music market, as part of our family, so we’re going to go with an experience that we’ll be able to offer in the future, MP3s and different songs, not only over the air but through a unique approach which we’re the only one using it – through a portal that’s going to be called the mobile portal. You’ll be able to go there and download via your USB connection, everything on your phone: music, clips, programs – you’ll be able to vote.
And from a technological standpoint we’ll be able to launch very quickly in the next two or three months – I’m not going to tell you the date for competitive reasons – the ability to be able to program at a distance your PVR. You know that we offer PVR – it’s a very popular set top box, and a lot of people said to us during our research "well, sometimes I forgot to program my PVR – or because I heard through newspaper advertising that there’s something playing tonight that I want to program it. Over the air, via your wireless, you’ll be able to program it.
GOB: I think Verizon has an agreement for that with TiVo in the States. With wireless penetration increasing, growing so fast in Canada, do you think there’s any danger you’re too late to the party?
RD: We feel our timing is right, because Quebec is underdeveloped. Canada is at 53%, Quebec is around 46, 47% and if you look at the United States they’re reaching 70% and moving fast all the time. If you look at Europe, that’s another story for different reasons, but they’re over the 90% level.
Just to give you an example, broadband Internet was lagging behind in Quebec four years ago. Now close to 50% of our residential customers now have a broadband connection.
Why don’t you think we can not reach in the next two, three years, 70%. The United States did it and I think we can do it as well. So take 23% times – in our territory we have close to five million customers, 2.4 million households – 23% of that is a lot of customers available, without counting the regular churn.
GOB: Now are your wireless offers all post-paid plans or will you push pre paid?
RD: No, we’re focusing only on post-paid currently. It’s a more profitable approach, we have less churn and for us, it’s what we’re focusing on.
GOB: Will you be available across the province, outside of your cable territories as well?
RD: We’re targeting only our customers. Let’s put it this way, the phone will work around the world. It’s the Rogers network – it’s really the same technology, the same network, so this will work, but we’re targeting only the customers in our territory.
GOB: So you don’t plan to have any customers in Ontario or anything like that?
RD: No. We don’t plan for that now.
GOB: Looking at the larger picture, how would you describe the competitive battle in Quebec between yourself and Bell and others, beyond just wireless.
RD: Bell is a great company, a great competitor but what plays against Bell is they were in a monopolistic environment for 120 years. Obviously they had a free ride for many years, (customers) didn’t have any alternative.
So we came up with IP telephony and there have been a lot of things said in the market that we created a price war. Well, keep in mind that our digital TV is more expensive than Bell and our Internet is way more expensive then Bell. We haven’t touched Bell’s pricing there. We went with only an aggressive – and I wouldn’t call it aggressive –a very competitive offer of $16.95 for a baseline. If you look at Bell they’re around $23… they decided to go to a price war on other products (like a $9.95 DSL offer in Montreal) and we feel we don’t have to match them. We feel that our proposition, our one-stop-shop concept, our experience with our products, and that our products are faster and more reliable – in terms of Internet.
Our illico digital offers a greater experience with VOD, which we have exclusive content, all the programming of TVA is free and 24 hours later on replay and the phone with all our features – we feel that we do have an edge on the competition. And of course our outstanding customer service is getting better and better all the time.
GOB: So have Bell’s price cuts on their Internet product hurt you at all?
RD: No. They started in April, or May – and if you look at our results we had the best second quarter ever.
GOB: Sure, I covered all of that.
RD: We had records in terms of basic TV, digital TV, Internet… we haven’t seen anything yet hurting us actually, I think we’re in good shape.
GOB: Are you surprised by your success in wireline telephony and how many customers you’ve been able to gather in a year and a half?
RD: Well, let’s put it this way, it’s been over our expectations – I would be lying to you if I didn’t say that. Look, the Bell product’s a great product, it’s been around a hundred years while it’s a new technology in our case. But, I think people were looking for an alternative, particularly the young generation. For them to carry a cell plus their wireline, they were tired of paying a lot of money for that and they didn’t have any alternatives.
That’s what really made a difference… we thought it’d be impossible for us (to get) as big (in telephony), and we were wrong, obviously. In certain areas, without telling you everything, we’re over a 20 share.
GOB: And that’s starting to look typical across the country. Shaw’s voice over IP is growing very quickly as are Cogeco and Rogers… Are, you concerned at all about the Commission’s voice over IP reconsideration, a decision on which is due in a few weeks, and what that might do to your potential for growth?
RD: Look, we believe in competition, we’ve been better because of competition. Videotron became better when we acquired this company because we face the competition and that forces us to always be better.
The only thing we’re concerned is we’re talking about the biggest, company in Canada that has a lot of cash available to them and we feel that if we ever had a chance as a second player to really be in place we need a bit of a break.
If (the CRTC) decides otherwise, we’ll face it… but I feel that they should at least give a little chance to all the players nationally so we’re fully in place, and then let the market forces play.
We have invested hundreds of millions of dollars, so our concern is that, that if you deregulate the pricing, will they slash to a point that will eliminate you again, I don’t know. But I guess this is part of the business right, but I leave this decision in the hands of the CRTC.
GOB: How goes the video battle with Bell in Quebec and are you concerned at all with their IPTV launch that they’re going to have sometime?
RD: We’re always, always going to be concerned about competition coming with new technology and so we’re prepared for that. We’re analyzing the competition so we can always, I believe, have an edge of them because we’re always improving the experience with our product.
Improving our network: We’ve been in that business for many years. Everything goes through one cable, I mean IP’s great and IP’s going to be the future but IP technology in terms of TV is going to take time to get the quality, and we’ve tested that.
GOB: Well eventually everything will be IP-delivered you know – including cable – and in the meantime there’s switched digital and channel bonding and all sorts of different technologies you can take advantage of.
RD: Exactly, we’re working on switched broadcast, we’re working on DOCSIS 3.0, we’re testing it, in the future you know DOCSIS will give us up to 200 megabytes download.
That’s pretty fast so we’re going to remain on the edge in terms of technology. We’ve built our reputation in part based on an Internet connection digital experience. Our Internet congestion level was under 1%, so our network you reach always the speed, the 5.1 with our speed builder, all the time, so we made a promise to our customers that we will always have a network that is totally free of congestion.
GOB: Are you happy now with the switch you made to cable. Did you know what you were getting into when you took on this role?
RD: I was always very passionate about technology, I built my home theatre and my discotheque and everything in my house so I said why not combine business with my expertise, my passion, so that was great move for me because we started very tough, as you know, when Quebecor acquired Videotron five years ago.
The technology is changing every day, so that’s the exciting part, so that the challenge for the owners and board members, is what technology are we going to pick again so that’s why we’re very confident that IP and wireless, that’s the way to go in the future.
GOB: Well and that’s always the scary part because technology changes so fast as you know.
RD: Exactly, exactly.
