Telus sees digital TV service over broadband as way to augment revenues

Telus Corp. is the latest Canadian telephone company vying to go head-to-head with existing broadcast distributors in a bid to realize increased revenues from its broadband network. Subsidiary Telus Communications Inc. has applied to the CRTC for broadcast distribution licences to provide digital television service in British Columbia and Alberta, a move it says will allow it to bundle multiple services to its consumers and bolster customer retention - Broadcasting Notice of Public Hearing 2002-10. Telus expects to generate $5.4 million dollars in revenue in 2003 from its proposed digital TV service. By 2009, the company indicates it will produce $344.6 million, according to projected revenues filed in its licence application with the CRTC. The company’s projected expenses, however, are not being made public. In applying for broadcast distribution licences, Telus joins other telephone companies SaskTel and Manitoba Telecom Services Inc. (MTS) (CCR, Dec. 19/01) competing or planning to compete with cable and satellite TV distributors in western Canada. James Goliath, VP of multimedia at Telus, sees the addition of a television service as a way to generate incremental revenues by bundling it with the company’s existing phone and high-speed Internet access offerings. "I see this (television over broadband) as the wave of the future," Goliath tells Canadian Communications Reports. "And if you look around the world, you will see that it’s going on in other countries as well. A number of Asian and European locations are doing their own trialing and testing." Telus tells the CRTC that its application "is in keeping with the development of an innovative and competitive BDU (broadcast distribution unit) environment and the evolution of integrated, digital, high-speed networks capable of delivering a range of voice, data and video services." Telus is applying for two Class 1 licences to serve seven communities in Alberta and nine in British Columbia. It plans to offer its service – tentatively called IPTV, which is short for Internet Protocol TV – in Calgary, Edmonton, Fort McMurray, Grande Prairie, Lethbridge, Medicine Hat and Red Deer in Alberta, and in Kamloops, Kelowna, Nanaimo, Penticton, Prince George, Terrace, Vancouver, Vernon and Victoria in British Columbia. The company anticipates rolling out the service within a year of approval by the CRTC, and possibly expanding to other cities. It projects offering the service next year in all the listed cities, except Grande Prairie, Lethbridge, Medicine Hat, and Vancouver, which would be held off until 2004. Telus remains tightlipped about where it will trial the service and exactly what software it plans to use to deploy its TV service. "We’re still doing some evaluating (on which city to do trials), but partly for obvious competitive reasons, we’re not planning to disclose that information until we need to," Goliath says. Like Aliant Telecom Inc.’s VibeVision digital TV service, which has been shuttered (CCR, Sept. 12/02, June 21/02), and SaskTel’s service, Telus is planning to roll out the service over its existing ADSL network. MTS is using VDSL technology. Goliath notes that Telus isn’t necessarily going with iMagicTV Inc. software, which was used by Aliant and has been chosen by SaskTel. "We haven’t completed our evaluation of all the alternatives yet," he says. "There are actually a number of players in that market today." Goliath admits that customers will have to be within about a three-kilometre radius of telco central offices to receive the television service, but he doesn’t see it as a problem to deployment. "There is certainly a distance restriction," he notes. "So your ability to provide the service is dependent on the kind of network architecture that you have, and we have architectured and continue to build a very robust network such that when completed over the next year and a half, a very high percentage of our customers are within that kind of range and eligible for the video service." Telus has committed $500 million toward upgrading its broadband network over a three-year period ending at the end of 2003, and Goliath anticipates 90 per cent to 95 per cent of its customers will be able to receive the video service by then. The customers, located in 38 communities, represent 70 per cent of the populations of Alberta and British Columbia. The digital TV service will be able to provide two simultaneous digital television streams, meaning that subscribers can receive signals on two televisions in a household with just one digital set-top box. With VDSL technology, MTS is currently streaming digital signals to three televisions in a household as part of its trial in Winnipeg. Digital cable and satellite TV subscribers must have a digital box per television to receive digital signals on multiple TVs. "VDSL has higher bandwidth potential, which enables (MTS) to provide three television streams. But it comes with tradeoffs; it only works at even shorter distances. It typically can’t exceed one to 1.5 kilometres," Goliath points out, in explaining why Telus prefers to go with ADSL technology. Being able to bundle a television service with high-speed Internet access and telephone should help reduce customer churn, Telus notes in its application. It also points out that many cable companies are anticipating adding voice services to their offerings as early as 2003. "Not only is there significant demand from customers for integrated voice, data and broadcasting services, but offering integrated services also has significant financial implications for the service provider," Telus states. It points to Cox Communications in the United States, which reports that 89 per cent of telephony subscribers also get video and high-speed data services. Cox subscribers to both video and telephony also exhibit low churn rates of 1.1 per cent per month, while subscribers to all three products exhibit churn rates of 0.8 per cent per month. That compares to video subscribers only, which have a churn rate of 1.7 per cent. Telus’ application for BDU licences is not its first foray into broadcast distribution. It held a 50 per cent ownership stake in "cable overbuilder" Pacific Place Cable in Vancouver, which it sold in 1999 (CCR, Dec. 8/99), and conducted high-profile cable TV trials a few years ago in Edmonton and Calgary (CCR, Aug. 26/98). The telco also operates a hotel entertainment service under a CRTC exemption order. Telus’ application will be considered at a November 18 public hearing in Gatineau QC. Comments on the application are due by October 24.

Telus sees digital TV service over broadband as way to augment revenues

Broadcast | September 26, 2002

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