LIVING IN THE BIG CITIES, it’s easy to forget – or to never think about – what it’s like in smaller, more remote communities.
A few months ago, I mentioned to a small operator how a far larger MSO still had some substantial 330 MHz and 450 MHz cable systems remaining to rebuild (with just a little mocking disdain in my voice). His response was a little bit sarcastic, wondering what’s wrong with systems like that, since much of his programming and data was still being delivered over such plant to presumably happy customers.
It cleared my head and drew my focus on the challenges of the smaller cableco a little tighter.
There are different realities for cable customers in small communities that feature their own local, independent cable company. It’s not all about chasing new VOIP customers and getting people to shell out for that $800 PVR, or $5 for a VOD movie.
It’s still about big analog basic packages, low prices, fast high speed Internet, offering digital because “you have to” and loyal customers, says Jim Forsyth, general manager of Vancouver Island’s Campbell River TV Association (CRTV) and current chairman of the Canadian Cable Systems Alliance.
It’s about making money where you can and saving it wherever possible. In that spectrum, the CCSA has been an enormous help to small, independent Canadian cablecos, says its chair.
“I wouldn’t be in business today if not for the CCSA,” says Forsyth. “Having to deal with over 100 different program suppliers and contracts and negotiations is just mind-numbing.” 
“If you had to do that on your own, as a small operator, you just couldn’t do it.”
So what does the small cable operator face these days? What are the special challenges and why are so many still very successful?
With just over a month before the CCSA AGM (September 28-29), I chatted with Forsyth (right) about his company and the industry in general. What follows is an edited transcript.
Greg O’Brien: Do you still have the cheapest basic cable rate in Canada?
JF: Yes we do. It’s been like that for 48 years. It’s the lowest cost – we’ve been pushing the big basic concept.
GOB: It’s, what, 14 bucks?
JF: $14.33. And, we have a tier one – or extended basic service – for just over $21 for 63 channels.
GOB: Wow. That is cheap.
JF: We have people who move to the community who just can’t believe the price tag. But, again, It’s a community-owned, non-profit association, which is quite different than the other 99% of cable operators in the country.
GOB: Yeah. There’s Access Communications (Regina) and Westman Communications (Brandon) and a few in Quebec, which are still co-ops (there’s one in Labrador City, Nfld., too).
JF: Yes, but this one is even a little different from those.
GOB: In what ways?
JF: More from the standpoint that our rate structure is so low and that they’ve attempted to upgrade along the same style as the larger operators, with rates and structures and tactics, but we’ve gone our own way.
GOB: Has your low rate structure hindered you at all in terms of growing digital or high speed Internet?
JF: It has. The problem when you drive a big basic concept is that it’s great because you don’t have the need to go into such a huge capital investment for digital. But you do lose ground getting digital customers because on basic you’re getting 63 channels of analog and we don’t charge for extra outlets or anything else, so you’ve got single family homes with loads of programming where their remote works and you just plug it into the back of the TV – it’s so simple, so easy.
So, when you try to sell them something else on top of that, it creates a problem, so our digital experience is not as positive as others have had.
GOB: How long have you been offering digital now?
JF: We’re into probably our fifth year now. We’ve been plodding away at it – it’s a slow process to convert the old analog stuff.
GOB: What’s the penetration been like?
JF: We’re in the low teens. It varies – there’s some seasonality to the whole thing. The main focus is people are asking for the movie channel (Movie Central) and sports to get digital.
We went to a thematic package concept where we discovered – which is certainly the experience of others – the packages are sometimes an easier gain. The consumer sometimes find it extremely difficult to pick a pack (a-la-carte).
GOB: Well, especially with so many channels now, to go one-by-one-by-one…
JF: It’s almost impossible to sell a product like that and the consumer, too, doesn’t know or understand (picking a-la-carte) and perhaps finds that too difficult, so it’s easier to offer thematic packages and ask “what are you interested in?”
GOB: What’s your high speed Internet penetration like?
JF: Pretty good. We’re about the average in the 25-percentage sort of range and it continues to grow. There’s a lot of competition here from Telus – or there has been at least, now that they’re into a big strike –so that’s actually helping us out considerably. People are coming to us.
Telus has had its problems over the years and we really have an advantage in the sense of our local service and response – and our (Internet) product is faster. But the consumer wants to look at the price tag and bundle and packaging – and that’s an issue for some because we don’t have the things that Telus packages with, nor do we have the base of subscribers over which to average the costs. So our Internet pricing may be higher than Telus, but we’re offering a better product.
GOB: You have how many total customers now?
JF: We’re just over 13,000.
GOB: Are you still feeling the impact of satellite or have the numbers of people leaving slowed?
JF: It’s flattened. We’re not seeing any big losses from satellite any more. People who were interested in satellite went that way already and we’ve had a lot turn back to us from satellite. Again, it’s far more expensive and satellite has had a lot of growing pains… on the west coast here, with the heavy rainfall, satellite reception is affected by it and people were very frustrated with it.
GOB: I remember chatting with you about this before and your losses to satellite were never as bad as some others.
JF: No, but we were successful in making an application to the CRTC to show our losses were at a certain stage and we were successful in getting de-regulated but still, we’ve found that over the years, we have not suffered the kinds of losses that others have had.
GOB: What’s on the horizon now for CRTV? Are you looking at voice over IP or other broadband opportunities?
JF: We’ve done a lot of hard work looking at VOIP. We looked at the PacketCable side of the business and it’s just not cost-effective for us to get into the PacketCable environment. There are no large operators around us (Campbell River is a three hour-plus drive from Victoria) to share the capital costs of switching so we sort of slide over to the other world, which is the Skype (www.skype.com) and other groups which are out there… so we’re not going to get into VOIP at least at this stage.
There are two major factors for remote communities… one is local numbering – it’s a major issue for VOIP service. And the same goes for the other, 911 emergency calling. The Commission is trying to make some changes to that, but those issues have hurt things a little bit as far as the VOIP business goes for small operators. At the end of the day, I think that the players like Primus and especially Vonage are doing well…
GOB: Are you just too small to be able to afford to handle all of that stuff like local numbering and 911 and switching?
JF: Size is the big factor. Changing technology is another one. But we put it down to, really, our remoteness and local numbering, which is our big issue here… It all comes down to money.
GOB: Now, for a system like yours, is video on demand do-able?
JF: No. Not in its present format. It will be once the Internet comes of age. A lot of this video on demand technology is what I call interim technology. VOD is not here today. It might be with some sort of partnership. For example, Rogers in Ontario would be ideal for a partnership relationship with other players serving Hamilton or so on. But VOD as far as little operators, we can’t do it.
GOB: I guess you’ll have to wait until IPTV develops so that it’s more easily delivered that way over your existing network and you may not need expensive server upgrades and the rest of it.
JF: Exactly. And, the big guys are worried about that one because if it comes into being, then they’re losing control over a revenue stream. But hey, it’s not a revenue stream I’m seeing too much revenue coming out of.
It takes a lot of cost to put into it and it takes a long time (for payback) and the technology is changing all the time.
VOD for operators with anything under 15,000 subscribers (is not affordable). Our world is about big basic concepts and getting as many analog channels as we can, load it down, put on a reasonable price tag and make it simple as possible for customers.
GOB: Do you have any HD channels?
JF: Yes we have a few. But that’s been a bit of a problem with HITS QT or HITS Classic.
GOB: You were stung by that CRTC decision on Star Choice/Cancom, where it denied the option of carrying on with the omnibus HD channels it created?
JF: Part of the problem is that the HD services that are coming through, the vast majority of the programming is not HD.
GOB: And that’s why Star Choice/Cancom had been doing those omnibus channels until the Commission told them they couldn’t any more.
JF: I think that was a really smart move by Cancom to realize that if all the programming is not HD, then what are we doing here? But, the Commission is pushing from a different angle and I don’t think they fully understood what Cancom was doing there.
GOB: They were hearing from the broadcasters that it had to stop and it would affect their simultaneous substitution and so on… So, given all that we’ve talked about, how does all of this – what the small operator is facing – wrap around the CCSA AGM in September and its Interconnect theme?
JF: The CCSA is an organization definitely doing its job for the small operators as a buying group. It’s well-managed with (CEO) Alyson Townsend – and they’re doing an excellent job keeping the programmers in line – let’s call it our partners in line. Because it is a partnership. We have a very close working relationship.
Same with the CCTA. They do an excellent job in Ottawa attempting to keep the Commission aware of what small operators are all about. But every so often, the CCSA has to jump out and say something like “listen, there are small operators out here who don’t necessarily agree with some of these decisions,” and that’s when the CCSA will put in an intervention.
But, whether or not the CRTC is listening to small operators across the country is questionable at times when there are big system decisions. Sometimes the Commission needs to listen to the small cable operators and get a better understanding… There’s a whole pile of issues out there, especially with interconnection.
GOB: Do you see yourself getting into wireless at all?
JF: Yeah, I think extending plant wirelessly makes a lot of sense – Internet stuff – wireless in the sense of DOCSIS equipment that allows us to go after trailer parks of marinas…
The whole thing is blending too and the next big opportunity is to offer everything wirelessly with the use of the cable plant and its powering.
