THOSE IN FAVOUR OF an advance wireless spectrum auction that imposes limits on the big incumbent wireless operators were given a huge gift last week when word leaked out that Telus would make a bid to buy Bell Canada.
After weeks of pounding away at a message that said any auction which placed spectrum caps or set aside some spectrum for newcomers was an unconscionable subsidy for large corporations that Canadians would ultimately pay for, Telus dramatically changed tactics once the news broke about its involvement with Bell.
Suddenly Telus CEO Darren Entwistle and his senior executives said they would accept caps, mandated roaming, set asides, whatever it might take to try and push the proposed mega-merger through (assuming the BCE board, shareholders, the regulators and the Canadian public want it, that is).
So Videotron president and CEO Robert Dépatie (pictured below) was in a pretty good mood last Friday, just a day after the story broke. Telus’ capitulation and Bell’s "no comment" just about leaves Rogers Communications as the lone holdout on the "no rigged auction" side of the file, which is probably good news for Depatie and Quebecor Media’s cable company, which desperately wants to be a wireless player with its own facilities (Reply comments to the submissions Industry Canada received last month are due in June 27th).
But besides wireless potential, growth continues at Videotron among digital cable, Internet and especially cable telephony customers, so Dépatie has many reasons to be ebullient. What follows is an edited conversation between the CEO and Cartt.ca editor and publisher Greg O’Brien.
Greg O’Brien: My first question, of course, is about your thoughts on (a possible Bell-Telus merger)?
Robert Dépatie: Well, we don’t comment on that. It’s not really our business. The only thing that surprises me is that suddenly Telus is recognizing that there’s not enough (wireless) competition and that we are behind technologically. When you read very carefully and you listen to what (Telus CEO Darren Entwistle) said… that’s the only thing that we found. So we’re okay with that, but all the rest, I mean we just have no comment on that.
GOB: It’s interesting, I talked to (Telus EVP) Janet Yale at Telus earlier and she mentioned that now the company in support of the set-asides and all the rest which means that your company, for example, would be able to get into wireless more easily, so you must be pleased with that part of it.
RD: That’s the only point I can really make is that suddenly they are recognizing the need for competition, the set aside of spectrum, tower sharing and roaming. They said that very clearly, so that’s good news.
GOB: Does this put you in the mood for any mergers or anything like that?
RD: No. Actually, no comment.
GOB: Well, where are you now with the wireless file given all that’s gone on in the past days?
RD: As you know, we’re responding with a paper next week and… we want to be a carrier, of course. We want to be a wireless company and we’re going to be – if and only if – we have the conditions that we feel are necessary to be successful – which is again spectrum set-aside, tower sharing and of course mandated roaming.
GOB: If those conditions don’t present themselves, do you still want to press ahead or are you going to walk away from it?
RD: We’re going to probably walk away from it, but… let’s assume that there’s no set-aside. We strongly believe that this is not good for the country because we all know if there’s no set aside, not one incumbent is going to let us in, and so nobody’s going to bid. (Spectrum) is worth more to (the incumbents) than it’s worth to us when you think about it.
I think for somebody like us… to go into this business, (spectrum) has a lot of value – and you’ve got to be prepared to pay a lot. So, we feel that the government will lose at the end of the day (with no set-asides or caps), because not only are they going to get less money for the spectrum, but more importantly, no new investment.,
With competition you create change, you bring new things like aggressive pricing strategies… We feel that prices are too high, so we’re going to walk the talk. We believe that we can do something very good for consumers.
GOB: What have you learned so far from your existing wireless business as a wireless MVNO in Quebec?
RD: There are tremendous opportunities. But the problem is that we do not have control of the network. We pay obviously a huge fixed cost because we’re leasing. I can’t say how much because it’s confidential but you can easily understand that we pay, I mean, serious cents per minute to Rogers because obviously that’s a model that they’re pushing. So, you’re not very competitive in pricing, you don’t have any control of your technology, you don’t have a lot of control over your handsets… So therefore, you don’t have the flexibility of being creative in the launch of new products. And you don’t have any flexibility in terms of pricing because you’re going to lose too much money.
But to answer your question, what we continue to learn – and that’s why we’re excited about the wireless auction – is one of the reasons I supported the MVNO model was that in order to get ourselves prepared to capture what we can, even if it’s not a lot in the short term, we can learn the business very well. All of our operations, including our call centers, IT salespeople, our stores, our marketing people are taking care of wireless. We’re learning the business very well. We’re starting to understand the business very well – we’re invoicing our customers on one invoice. The only part we’re missing is the engineering.
Consumers are very excited about technology, very excited about voice of course, but they want more content, adapted content. And again and again, after all our surveys we’ve done in Quebec, but more importantly a recent one we’ve done in Canada with Praxicus, they show clearly that they find it too expensive.
So, to get the penetration up, you’ve got to get the prices down.
GOB: And that will come with your own network?
RD: Well our strategy will be to offer the best value possible now. I’m not going to tell you that we’re going to drop the price by half. The value that we’re going to provide to consumers will equal more for their money.
GOB: Has offering wireless affected the sales of your other products (cable, high speed Internet, VOIP)? Has the bundling aspect grown where you’ve been able to add wireless along with cable along with the high speed internet?
RD: We don’t provide this information unfortunately Greg, but I can tell you that most of our (wireless) customers are bundlers: 98%-plus.
GOB: I’m sure you’ve seen Rogers launch the Blackberry Curve this week.
RD: Yeah.
GOB: You’re a product guy, you see a brand new product, an exciting product coming to market and it must disappoint that you can’t really offer it because your terms with Rogers don’t allow you to offer it right now.
RD: Currently… we can’t offer Blackberry.
GOB: No Blackberrys at all?
RD: No. We can’t under our current contract. We’re trying very hard to get it. So, that shows that MVNO is a model that is not a long-term viable model… unless you can have a contract that gives you a lot of great conditions that you do actually have control end-to-end and better pricing and stuff like that… but I’m not so sure anybody will offer that.
GOB: And I’m sure you’ve heard the skeptics argue that too that your thrust for an altered wireless auction is to get better terms out of Rogers –
RD: Oh no, no, no.
GOB: — to get a better deal and better handsets, that type of thing.
RD: I’m sure if I would be in the shoes of Rogers I would think about that, but obviously no. We’ve always been in control of our destiny. We have our own network on everything including telephony. So, we don’t believe in non-facilities based businesses for the long run. And we’re not in it for the short term, we’re there for the long run.
So, no it’s absolutely not a strategy to get Rogers’ (wholesale) prices down.
GOB: Okay. Any thought to getting together with MTS on a joint venture to do a new national company? They’ve run wireless for a long time, they would have all that engineering experience.
RD: No, we haven’t decided anything yet. We have spoken, I can tell you, to a lot of companies nationally which we’re going to have to keep confidential. But no, we haven’t made up any final decision, first of all, if we’re going to play with somebody and with whom after that.
GOB: Do you think that the federal government, perhaps before the spectrum auction, should address or look at the foreign ownership rules to really open it up, completely wide open to foreigners?
RD: I said it very clearly in my speech (at the Canadian Telecom Summit), if you really want to have the most money, well just open up the foreign policies and just let the biggest ones in the world bid. You’ll get the most money. But obviously I don’t think (the federal government will) be prepared to do that. That’s probably in the future, and quite frankly if they do it, it’s going to take more than six months to solve. I mean, it will probably go one to two years before you get the law in place – and after another election for sure.
GOB: When (Industry Canada) sets the (auction) rules, will you continue to push to have the spectrum auction much sooner than waiting until 2008?
RD: Absolutely. Our position is let’s have it in September. The faster the better for us – the better for everybody actually… It’s possible. We still believe in September it’s possible because the paper that we’re going to deposit next week, you’re going to read it and they’re supposed to come back, we’ve heard, in September with the conditions. And if you got the conditions why not do the auction (right away)?
GOB: There’s no reason to wait until 2008, I don’t think.
RD: We haven’t seen anything on paper saying they’re going to come back in September, but I thought the rules would be in place in September, with the auction would be at the beginning of 2008.
(Ed Note: Industry Minister Maxime Bernier has promised the auction will be in "early 2008".)
GOB: Let’s talk about the cable telephony side a little bit. Are you still growing at the same rate you have been?
RD: You know Greg, we don’t provide guidance – but yes we are. Well, the first quarter, as you know, we got in the 50,000 range again. I’m not giving you any indication that we are going to reach that number, but why should it stop at the end of March? That’s a question mark, that’s a question I’m asking you. So, we’re still very positive about the IP telephony. The consumer satisfaction level is high.
GOB: Have you seen any impact due to the fact that Bell no longer has the old win back rules to hold them back? Has that hit you?
RD: No.
GOB: No? Perhaps they’re too preoccupied with who’s going to buy them.
RD: A good thing for us… When you think about it, that’s going to preoccupy a lot of people, it’s a huge acquisition, a huge merger, so that will obviously take a lot of executives working on that.
GOB: I’m sure you heard Ted Rogers’ comments about all the suits passing through and how it can be distracting and how he told ‘em to go to hell or whatever.
RD: Yes I do remember that. The famous Ted. He’s a great guy.
GOB: But he called you all scallywags.
RD: I know, but that’s okay. That’s the way he is… very colorful.
GOB: When we get right over to the cable TV side, where is the HD in Quebec right now? I know it’s pretty hot in Ontario, but there’s a lot more high definition choice just because of the higher number of English language HD channels. Where do you see that market right now in Quebec and where is it headed?
RD: Our biggest growth is coming from HD. And it’s going to grow more than ever when we see the specialty channels, particularly when the sports channels in French go HD. We know that RDS, which has a 90-share of the market in Quebec, should be available this fall (in HD).
We should see HD becoming bigger and bigger all the time. It’s very important to consumers and it’s part of our strategy.
GOB: So, when you see your TVA compatriots in the hallway, do you tell them, you know, "we’d like more HD"?
RD: They are launching it now and so we should see more HD pretty soon. Of course I’m pushing them a lot. We’re on the same committee. I won’t tell you what I tell them, but yes, you should see TVA in my opinion in the very near future (move to HD).
GOB: The last thing I wanted to ask you about was the Internet security campaign launched this week. What’s the reason behind that and what are your goals there?
RD: We heard through our customer research that parents understand the risks involved with Internet and their kids, but, they don’t necessarily take action or understand how to take action. So, we thought that as a good corporate citizen, why don’t we help them? Why don’t we help them by providing them the tools, because the Internet, when you look at the upside, obviously it’s tremendous, we all know that. I mean there are a lot of opportunities for kids to learn and to enjoy being on the net.
But unfortunately there’s a lot of risk as well. So we said why don’t we help them understand the risk, give them the tools which is the parental control, and more importantly give them a site so they can refer to all the time and we’ll keep it updated on techniques, sites, music and stuff like that.
I think it’s a good idea (because) you see now the kids spending more time on the Internet than in front of the TV, which you can normally control. But what about when they are in front of their computers in their room?
