Cable TV and telephone convergence is getting dirty as the telecommunications sector finally fulfills its promises of the early 1990s.
The clash between two of Canada's largest telecom and cable providers took an uncivil turn late last month as Telus Corp. filed a complaint with the Canadian Radio-television and Telecommunications Commission (CRTC) over Shaw Communications Inc.'s first steps into the telephone market.
As their conflict spilled onto the street, the realization that these two titans are involved in some serious competition became clearer than ever. But it's not just Telus, Canada's second largest incumbent telco, and Shaw, Canada's second largest cableco, that are facing off - all the old cable and telcos are truly mixing it up now.
The recent conflagration started when Janet Yale, a senior executive at Telus, accused Shaw of "picking and choosing" which laws it would follow in its venture into the phone business. In the same Globe and Mail article, Shaw's CEO Jim Shaw countered that Telus's complaint was "not very pro."
Even apart from that uncharacteristic outburst, the signs have been growing right across Canada that two one-time (effective) monopolies, once separate and protected - cable and phone - are now recognizing the harsh reality that they are scrapping for the same customers today.
Rogers Communications Inc., Canada's biggest cableco, announced recently that it would start offering fixed-line phone service to Toronto this summer. Bell, Canada's biggest telco, also announced in 2004 that it would be making phone-line TV available for the 4.5 million households between Quebec and Windsor. That's a lot of announcements in a few months' time and it's no coincidence that they came in a cluster.
SaskTel, Saskatchewan's Crown-corporation telco, has been thriving in the TV business, nipping at Shaw, for a couple of years now, while EastLink (the East Coast cable provider) and Videotron (Quebec) have been in the phone business for years. So, obviously the technology on both sides has been viable for a while.
As Ian Angus, the president of Angus Telemanagement Group, predicted four years ago when I interviewed him for first time, when one giant telco finally steps into the other's sandbox, the battle will begin.
In August of 2003, Telus made the move, announcing that it was going to start broadcasting IPTV, or TV signals over phone lines, on a test basis.
This technology is emphatically not Internet television, although it could share a phone line with ADSL, potentially causing slow-downs in the latter. Nor would subscribers need a computer. Ultimately, IPTV is hardly different from cable TV, with video on demand and an unlimited number of channels possible, among many other things.
Shawn Hall, a spokesman for Telus, told me IPTV is still in test mode and will not debut before Telus can provide something that differentiates it in this market.
Last February, Shaw answered back, not with a "test," but a full working debut of a regular phone service applicable to only Calgary - saying it would gradually expand throughout Western Canada.
With Bell and Rogers now working on similar expansions, the convergence game is reaching its zenith in Canada.
Telus's complaint that Shaw is not playing fair ironically illustrates how truly interchangeable the offerings have become. Shaw's phone service - like Rogers' - is indistinguishable, to a user at least, from an old-fashioned telephone.
Shaw's new phone does not even use the Internet, only the coaxial wires. Calls have zero affect on that customer's cable Internet performance. Users simply pick up and dial, or get calls, using their regular phone number. There is no serious threat of voice delay and interference, as there is with true Internet phones. But, on the other hand, the phones are not "nomadic" (moveable into any Internet connection) as they are with the Internet.
And that's how we come back to Telus's beef with Shaw.
"If I was offering local phone service as a carrier such as Shaw, I'd have to let my customers choose which long-distance carrier they wanted to use," Angus told me last week. "Telus says Shaw is not doing that."
Thus, Telus's criticism, which Shaw says is bogus, highlights how comprehensive Shaw's service is. Shaw is truly in Telus's prime stomping grounds, selling old-fashioned phone service or bundling it with Internet (and cable TV) for those who want a package deal.
Shaw manages this by using "Bell as the competitive local exchange carrier," Michael D'Avella, senior vice-president of planning for Shaw, told me. "So we connect to Bell. And they subsequently connect to Telus or anybody else in Canada or around the world."
Thus, Shaw subcontracts to Bell, increasing Bell's Western Canadian presence. Meanwhile, Shaw gets to control the signal enough to ensure that its users don't experience interference, such as delays in voice transmission. (At least one old telco and a cableco seem to be getting along.)
Last week, Toronto-based Convergence Consulting Group Ltd. released a report predicting that the biggest gains (up to 2006-07) in this race for residential market share in Canada will be the cable companies.
The forecast, Convergence president Brahm Eiley said, "is not hard science. We're all consumers at the end of the day as well. If you can get a better deal by buying all your stuff in one place, why are you going to drive around?"
It foresees cable taking a slight lead over ADSL in the residential share of the high-speed Internet by 2007 (54 per cent to 45 per cent). But cable, he thinks, is placed to capture 11 per cent of residential phone market share.
"They paid the cost to be the boss. They spent the money to give themselves a lot of bandwidth capacity," Eiley said.
"We're forecasting that cable is going to take a lot of share away with from the telephone companies. And the telephone companies are not going to take as much share away as a group from the cable companies. Although, guys like MTS (Manitoba Telecom Services) and SaskTel, because they started early, will do a little bit better."
Such opinions put big pressure on the telcos. But in the end, with bandwidth growing fast and prices coming down, it looks like consumers are benefiting more than ever.
Web watch:
www.convergenceonline.com
www.angustel.ca
(Ian van de Burgt can be reached at ian@businessedge.ca)
