COMPETITION HAS COME to Saskatchewan. The little-big (population-area) province has had competition on the terrestrial video side since 2002 but only recently has a serious voice option come available.
It was quite a lag between the cable companies in the province losing 50,000 video customers and their recent launch of voice over IP. With the largest MSOs in the province: Shaw (Saskatoon, Prince Albert) and Access (Regina and area) now – or about to be – adding VOIP, competition is officially hot.
So how is the provincially-owned telco faring, with still 98% of the local phone lines? President and CEO Robert Watson (pictured below) recently talked with Cartt.ca editor and publisher Greg O’Brien on SaskTel’s plans and its competitive responses. What follows is an edited transcript.
Greg O’Brien: I want to start with your Max product, which is more than just TV, obviously. How is it performing?
Robert Watson: Max is an interactive video product that we offer over our telecom network. It’s got the interactive screen where you get the services; and you get your e-mails onscreen. Most of it is, of course, the content that is provided by broadcasters… and we just launched high definition – 27 channels to start off with.
GOB: How do you market it in Saskatchewan – as a different alternative to cable – as a "me too"?
RW: Oh it’s definitely an alternative – a different product for sure. We think the product is much superior to cable. The mere fact that the content is all held back in the central office and you actually go and pick the content from your local server, it allows us to put more content out there than cable companies can. So we think it’s a much superior service, which we offer it at a competitive price.
GOB: Right. Are you happy with response so far? You’re at 50,000 customers?
RW: We’re 50,000-plus. We’re well over 50,000 customers now – we’re bordering over 20 percent market share. We’re very happy with the product and we’re starting to get significant queues for HD orders now. So we’re really excited.
Max was actually the fastest growing new product introduction that we had, even in comparison when we introduced high speed Internet cellular.
GOB: It’s interesting that as the terrestrial telco TV services got going, cable operators always said "well, it’ll never do on demand or high definition," and you’ve proven them proven wrong on those counts so far.
RW: I come from the telephone side but I was with Shaw for five years so I got to see the cable side, too. I’ve got to tell you, this is a pretty darn good package that we have put togethe
r. We have spent the money this year to upgrade our network in order to make sure that we can keep ahead of the curve – because our consumers are demanding more and more bandwidth. They want faster Internet speeds. HD takes a lot more bandwidth and they want four or five TV sets – four and five set top boxes in their houses.
HD, particularly, is one of the products that is now consumer-driven – a product that you wish upon once in lifetime.
GOB: Now, you said you have invested in your network this year – how much did you spend upgrading?
RW: We invested, this year, $136 million dollars – so that it’s 20 Megs to every home in the 10 major communities. We’ve also built up fibre within 900 meters of all our homes and businesses. Until now we’ve installed ADSL technology, so the next year we’ll change that over to VDSL technology in order to deliver the higher speeds to the homes.
GOB: What’s been the competitive response in your communities to Max from Access and Shaw?
RW: It’s been rough and tumble, I’ll tell you, because with the cable TV offering – it’s not regulated. So when a customer wants to come to us, our competitors phone them back the instant they hear about it and try and win them back.
The reason I bring that point up is on the VOIP side, we have to hold off for three months before we can try to get our customer back, and that doesn’t benefit the consumer at all.
GOB: Are the cable operators hitting hard at you on the phone side? I don’t think Access has launched yet.
RW: We have three companies who have registered as CLECs (in Saskatchewan: Shaw launched voice in mid-November, with Access saying they would launch early in the new year).
GOB: Just to keep going on that regulatory side, SaskTel has been a vocal – along with the other telcos – proponent of the Telecom Policy Review Report. What are you hoping to hear from (Industry) Minister (Maxime) Bernier going forward?
RW: We hope he’s going to actually start implementing aspects of the Telecom Policy Review and get the CRTC to more a market force driven focus rather than market size driven.
We’re prepared to compete with anybody. We have competed against the cable companies’ head on for last three years on the cable side – and it’s rough and tumble – and the consumers benefit.
GOB: The complaint that most often crops up is that you’re a Crown corporation and that means it’s an uneven playing field because you’ve got other resources to call upon that others don’t.
RW: Not at all. Our debt-to-equity ratios are as good anybody’s in the country and we keep it that way. We manage the business. We pay dividends as if we were an Income Trust. We do pay an equivalent tax that we pay back through – and we’ve not used one tax dollar since before the Second World War.
The consumers in Saskatchewan not only get one of the lowest local rates in the county, this is a profitable company where we return money to the shareholders. I can understand that argument if we were losing money or if we had high rates but we don’t.
GOB: The other thing I’ve thought about with the Telecom Policy Report is that it and the CRTC talk about significant market power, which SaskTel has. They even have an acronym for it with SMP – and say only when that is mitigated, then markets should be deregulated. Do you think SMP considerations should be banished?
RW: Yeah, we think they should. We really do. We think that with the convergence of networks and the technology with cable networks, telephone networks and with satellite it should be wide open and, may the best person win. And you know who the person going to win is: The consumer.
We think it should be wide open.
GOB: What’s the wireless market penetration like Saskatchewan?
RW: We’re about industry standard, about 54-55 percent penetration. So we see lots of potential there. We’re just converting our entire network to digital. We do have EV-DO launched here, so we will be spending lots of money on expanding the data side of the wireless.
GOB: Will that include video?
RW: We will be looking at that. You can get video downloads now and video clips.
GOB: But what about MobiTV like Bell, Rogers and TELUS have?
RW: We’re looking at it. I mean, we’re a company that looks at products and services and then figures out if we can enable them for our consumer.
GOB: SaskTel has a long and varied history in video and doing different things overseas with cable investments and The Hospitality Network – what is the out-of-province SaskTel still doing and how are you faring?
RW: We’re doing quite well. SaskTel International is still very active. We have our Martins product, which is a software provisioning software product which 11 telcos in North America use. And we are doing some projects in Africa right now on the contracting side and looking for more projects.
GOB: Now when you say projects, what exactly are they.
RW: Well we’re helping build up some high-speed wireless networks in Mozambique.
GOB: Okay.
RW: We started to do some work in Trinidad and Tobago and we’re looking to get some more contracts in Africa.
GOB: And the hospitality network (TV and telephone rentals in hospitals)?
RW: That’s starting to expand because the total care people are starting to look at a healthcare model for rentals and also there will be a convergence – a changeover in all health industry to different types of screens of course. The new screen we’re looking at are flat screens with keyboards attached, so that if you’re lying in your bed, you can surf the Internet.
There’s going to be a big resurgence in that marketplace. It’s growing well but it could be an even bigger resurgence there.
GOB: As the world switches to IP, you can also deliver Max TV around the country to all those hospitality networks.
RW: Great thought – wouldn’t it be? One of the things that we’re getting a lot of interest from is our expertise in putting together the Max product. We are getting a lot of interest for that and as you know, one of our major strategies now is starting to sell products and services that we develop here – around the world.
GOB: Do you envision exporting Max TV to other countries?
RW: I’d love to. Once we get things settled down here, we’ll certainly look at it… that certainly is a package that could be used anywhere.
