Cablecos push back against IPTV with discounts, subsidies

Cablecos Rogers Communications Inc. and Quebecor Media Inc. are offering steep discounts, free set-top boxes, and upgraded platforms to combat declining subscriber numbers as rival telco BCE Inc. expands its fibre-based Internet protocol TV (IPTV) service in Ontario and Quebec. “Cable is playing defence and telcos are playing offense,” Dvai Ghose, an analyst with Canaccord Genuity, told The Wire Report in an interview this week. “Quite frankly, cablecos aren’t used to playing defence.” First launched in Toronto and Montreal in September 2010 and expanded to Quebec City in March, Bell’s Fibe IPTV offering had 120,000 subscribers in April after gaining 33,443 customers in the first three months of 2012, the company said in a quarterly financial report released May 3. In quarterly data released two weeks earlier on April 24, Rogers announced that it lost 21,000 cable TV subscribers during the same three-month period, which Rogers CEO Nadir Mohamed attributed in part to “intensified IPTV competition.” Videotron Ltd., a Quebecor subsidiary, lost 8,000 cable TV subscribers during the first three months of 2012, up from a loss of 3,000 during the same period in 2011, Isabelle Dessureault, vice-president of corporate affairs, said in an interview. On April 4, Videotron began offering new subscribers two years of free HD or HDPVR set-top boxes, Dessureault said. Those boxes, to rent, usually cost $6 per month for HD and $9 per month for HDPVR, and to purchase cost $300 and $600, respectively. “What we’re seeing is that people are really going towards this offer, rather than going and buying the set-top box,” Dessureault said. Rogers also offers subscribers the choice of renting or purchasing its set-top boxes. According to the company’s website, subscribers can purchase HD terminals for $325 or rent them for $13 per month, while its HDPVR boxes can be purchased for $507 or rented for $25 per month. Bell’s website says new Fibe TV subscribers must pay a “one time” $50 professional installation fee, but receive a whole-home PVR box for free. Jacqueline Michelis, a spokeswoman for Bell, said in a phone call Wednesday that the prices for Fibe TV vary from one market to another. In a follow-up emailed statement, she said the IPTV service is available in a TV, Internet and home phone bundle for $25 per month for the first six months and $36 per month after that for Ontario subscribers, or $9.95 per month for the six months for Quebec customers and $24 per month after that. Francesco Villecco, director of video pricing and packaging at Rogers, said in an emailed statement Wednesday that Rogers now offers its NextBox 2.0 digital cable service as a standalone TV service or in a two or three-product bundle. He said Rogers’ digital TV packages start at $37 per month, “including a $2.99 per month digital service fee, plus the rental or purchase cost of a NextBox HD terminal or NextBox HDPVR.” Videotron's basic Trio Ultra HD includes illico digital TV, basic Internet and a telephony residential line for $96, the company’s website says. Its most expensive bundle, the Supra HD package, starts at $171. At an annual general meeting in April, Mohamed told Rogers’ shareholders that the company had embarked on a “two-year journey” to convert its television distribution technology to an all-IPTV network. Both Dessureault and Villecco said their companies offer digital cable services that are on par with fibre-based IPTV. Villecco said Rogers’ new NextBox 2.0 “already offers features and functionality that are similar to what you would expect from an IPTV service,” including a whole home PVR box, a high-definition programming guide with advanced search capabilities, and applications that allow users “to live stream TV on their tablet in the home.” He said the company is allowing existing customers to upgrade their set-top and Internet boxes to the NextBox 2.0 at no additional charge and is offering six months of free box rentals. Customers who upgrade also receive a free PVR extender, which allows for additional storage capacity, Villecco said. In a March 27 press release, Videotron said its new illico TV service features a redesigned set-top box system and interface with new visuals that facilitate easier browsing. The company said subscribers to the service will also receive a 500 GB hard drive that stores up to 55 hours of HD content or 280 hours of standard-definition content. Ghose said the cablecos’ reactions to Bell’s Fibe TV service represents a role reversal, of sorts. He said cablecos introduced high-speed Internet in the late 1990s and started taking away a “large number” of traditional dial-up customers. A few years later, he said, the cablecos started stealing the telco’s voice customers after the introduction of voice over Internet protocol (VoIP) services. “So for the first time ever they’ve had to play defence,” Ghose said. “I think it’s a little bit of a transition for them, from being the invader to the invadee.” Independent telecommunications analyst Jon Arnold said in an interview Wednesday that he expects Bell to continue to siphon customers from the cablecos in the years to come. He said Fibe TV’s success will motivate Bell to expand its fibre-to-the-home network to other markets so it can also expand its TV service footprint. “The only way they can do that is with fibre networks, because that’s the only capability that’s fast enough to handle the speeds,” he said. For continued success, he said, Bell must not only take subscribers from competitors but must also work to keep those who have switched over. “Sure, the price has got to be good, but they have to support it properly and give them a good customer experience,” he said of Bell’s Fibe TV offering. “If the service is choppy and don’t have good content choices, then people have reasons to leave,” he said. Dessureault said Videotron remains “very confident” in the face of Bell’s IPTV service. She said Videotron countered Bell’s “really aggressive” pricing with “unmatchable” customer service. “We think that from a full client experience, not only the price but the customer service, the product itself and the reliability of our network, the video on demand content, all this is part of the offering,” she said. “That’s the advertising we are pushing.” dgrenier@thewirereport.ca

Cablecos push back against IPTV with discounts, subsidies

Broadcast | May 17, 2012

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