Does the emergence of Fibe signal the end of satellite TV?

Millions of Canadians still receive their television service from signals beamed to space and back, even as the country’s dominant provider of satellite TV has given many of them a reason to switch to something else. BCE Inc. has been steadily growing the footprint of its Internet-protocol television (IPTV) service, Fibe TV, since its 2010 launch, and that growth has brought uncertainty about the future of its satellite technology in the decades ahead. Indeed, the day could come when satellite TV service is no longer a viable business, Mario Mota, a partner with Ottawa-based consulting firm Boon Dog Professional Services, said in a telephone interview. “ I would say, at minimum, a decade away,” he said. “But again, how many people predicted the strength of Netflix (Inc.) when they came out of the gate? The rapid change we’re seeing, the technological revolution; it’s a bit of a fool’s game to predict technological evolution.” Bell is the industry leader for satellite television service in Canada. It reported 2.2 million subscribers of its TV service at the end of September, 1.8 million of which were satellite customers, and 419,129 of which were on Fibe. Shaw Communications Inc.’s Shaw Direct product is the other major satellite-TV service in Canada, which had 903,565 customers at the end of August, a decline of 835 for that quarter. Shaw did not respond to requests for comment on the future of satellite TV. In the three-month period ending in September, Bell said it had a net gain of 72,813 subscribers to Fibe. Shawn Omstead, Bell’s vice-president of television products, said about 15 per cent of Fibe subscribers are coming from Bell’s satellite business, which lost 26,128 subscribers in the third quarter. Most Fibe customers are coming from rival cable operators, he said. Omstead said satellite-TV service has a strong hold in rural areas where IPTV and cable are unavailable, and among many suburban customers who are happy with the service and have no appetite for change. “In areas where satellite is successful, it will continue to be successful,” Omstead said. “Canada is certainly a pretty big country and there’s enough available market on the satellite side that that product will never go away, and we’ll never get fibre rolled out to every single home in Ontario and Quebec, either. It’s still a very viable technology.” Bell TV uses two satellites, Nimiq 4 and Nimiq 6, both of which are operated by Telesat. Nimiq 4 was launched in September 2008 and Nimiq 6 in May last year. Omstead said these satellites generally have a lifecycle of about 12 years. When asked about investments Bell is willing to make in its satellite infrastructure beyond the life of these satellites, Omstead said that “a lot will change in the next 10 to 12 years in terms of making those decisions.” “We made the decisions that we made and feel comfortable with those decisions that we made in the near- to mid-term,” he said. “Twelve years from now, it’s really hard to predict. Twelve years ago, no one would have said we would have done a fibre-based TV service.” Alan Breznick, a senior analyst with Heavy Reading, said it’s hard to imagine a day when satellite service is no longer around, though it’s something that has “peaked and it may be in a slow downhill trend for a while now.” He said the television service sector has become “saturated” so when one service, such as IPTV, grows, others will contract. “It used to be that cable and satellite grew together, and even cable, satellite and IPTV grew together, but now we’re seeing that if one grows, it’s because it’s taking away from the others,” he said. Bell’s Fibe service is available in bigger cities in Ontario and Quebec, such as Toronto, Ottawa, Montreal and Quebec City. It was available to a population of about 4.1 million households at the end of the third quarter, according to the company’s earnings report. Mota said he suspects that Bell would prefer its satellite customers switch to Fibe where it is available. “My gut tells me, in looking at the metrics of their business, I think they would prefer to have their customers in the Fibe community on Fibe,” he said. “Because I do think that if you drill down, they are higher-margin customers, they’re higher revenue per month customers, there’s probably better opportunities to multi-sell to them in terms of bundling multiple products in the household—so cable, phone, wireless, higher-speed broadband offerings, perhaps.” Mota added that the long-term cost structure of operating Fibe service is more favourable than operating satellite, which is “not a cheap undertaking.” With satellite, launching more HD channels means the company would need more satellite transponder space, which is very expensive, he said, adding that “in the long term, Fibe “becomes far more cost effective.” Omstead said Bell’s policy is not to break out and compare the profitability of specific parts of the company, such as satellite-TV versus Fibe. He did say that satellite “offers the most cost-competitive way for us to distribute television nationally. … Once we put the investment in the sky, then it’s a faster installation for customers because you’re not dealing with wires; you’re just putting a dish up. So it’s actually a very cost-effective way, once you’ve sunk the cost in the sky, to distribute television.” He added that new TV features, such as the extra high-definition 4K picture quality, might be deployed initially on satellite service because of the ease of installation of new technology. “It’s a pretty simple path ,” he said. “I’d say that satellite has the advantage in some areas where it can kind of innovate a little faster.” Omstead said Bell is not “actively” targeting its satellite customers to switch to Fibe. However, he acknowledged that in areas where both services exist, Bell would prefer that new customers go with Fibe. “There’s a bit more synergy with the Internet because the tech is already there installing the Internet,” Omstead said. “There is a stronger feature set , and if you’re moving into a newly built area where we offer both, we have that preference to get you on Fibe because we think, at the end of the day, it’s just a more competitive product versus where cable’s at today.” Satellite and cable TV subscribers have been declining lately, not just because of IPTV, but also because many people are turning to digital over-the-air TV service for free, following the switch from analogue signals in 2011, while others are simply watching less television as the Internet becomes a bigger part of their lives, according to a survey released in March from Media Technology Monitor (MTM). “I don’t know if will ever become obsolete, but it might go back to being a niche technology and not a mass-market technology, which is where it was 20, 30 years ago,” said Breznick. Mota said satellite TV’s future will come down to how long the cost structure of the business “makes sense.” “If their customer base declines to such an extent that the revenue that they earn from those customers cannot support the cost of running that business,” he said, “then yes, there comes a day when they shut it down.” With reporting by Derek Abma at dabma@thewirerport.ca, and editing by Anja Karadeglija at akarad@thewirereport.ca.

Does the emergence of Fibe signal the end of satellite TV?

News | November 18, 2013

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Does the emergence of Fibe signal the end of satellite TV?

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