Rogers IPTV launch to coincide with skinny-basic offering

Rogers Communications Inc. will launch its IPTV service at about the same time it starts adjusting to new rules that require service providers to provide skinny-basic TV packages for no more than $25 a month, the company's chief financial officer told an investor conference in Toronto on Wednesday. "With that enhanced user interface, it'll be good vehicle in which to launch some of the new, what I would call, packages," Tony Staffieri said during the TD Securities Telecom & Media Forum. Rules, announced by the CRTC earlier this year, will require TV service providers to start offering skinny-basic TV packages by March of next year. Staffieri said Rogers will likely start offering TV subscriptions that conform to the new regulations before the deadline, and at about the same time its IPTV offering will become available. In December 2016, TV-service providers will have to start giving customers the option of choosing channels, beyond the basic package, on an à la carte basis. Staffieri offered few details on what Rogers' IPTV service would look like. He said it would combine the best of what Rogers currently provides with its cable-TV service in terms of programs and packaging, but it will also more easily integrate Internet-based services such as Shomi, the on-demand streaming service owned jointly by Rogers and Shaw Communications Inc. He said Rogers' IPTV service "lends itself more easily to a pick-and-pay and impulse-buying type of environment, so we see our model changing from that perspective." Staffieri said costs to provide customers with equipment for the IPTV service will be about 25 per cent of what it is for the current cable service, explaining that "the need for a set-top box is different." He said he expects a gradual changeover of customers from Rogers' existing TV service to IPTV, which will take "several years." Staffieri said Rogers generally supports the direction the CRTC has gone with regard to TV regulation. He said market research indicates most customers will still opt for TV-channel packages, even when pick-and-pay becomes an option. Rogers, he said, faces the challenge of putting together packages that will appeal to customers, adding that the company will also be more selective in the channels it carries. Officials from both Rogers and Telus Corp. said Wednesday that as TV subscriptions become a tougher sell, the Internet is seeing significant gains in data usage, largely as a result of video streaming, and this is where telecom companies can make up for a sluggish TV-service market. "We actually like the transport business, and so if consumers increasingly want to buy their video from different sources, then that's OK," Rogers' Staffieri said. "We'll provide the transport for that, and the strategy is, 'Let's make sure we monetize that.' " He added that Rogers is "not happy" with declines seen in TV-service subscriptions and that "it's a trend we plan to reverse." Rogers' first-quarter results showed it had ended the period with 1.98 million TV subscribers, down 124,000 from a year earlier, though it gained 23,000 Internet customers to reach about two million. Staffieri said residential Internet data on Rogers' network is growing at about 30 to 50 per cent a year. Dave Fuller, president of Telus' consumer and small business solutions, told the TD forum that the company is seeing data usage over its broadband Internet network double about every 18 months. Fuller said he's seeing more "pricing power" in the area of Internet service than TV service. "I think your ability to continue to hike prices on pay TV are going to be very limited." he said. "If pay-TV prices continue just to rise $3 or $4 every year, all you're going to do is accelerate the level of cord-cutting that you're seeing in TV." With regard to higher prices for Internet subscriptions, Fuller said: "There's a reality of the fact that costs are accelerating to a significant degree in Internet and that will have to be reflected in price." Fuller said if someone's electricity use doubled, they could expect to pay twice the price. With Internet, he said, people are seeing price hikes of just $3 or $4 a month for using twice the data. He said Telus sees a service such as Netflix Inc. as more of an opportunity than a threat, noting how earlier this year Netflix was integrated into its Optik IPTV service. "Last time I checked, the over-the-top has to go over something, and that's the infrastructure and broadband Internet that we provide," Fuller said. "It's just a different way of providing a video service to a customer than a managed video service." He added that most Netflix viewers are also subscribers of TV services, and almost half of Telus TV subscribers are also Netflix subscribers. Officials from both Telus and Rogers told the TD conference that the so-called double cohort — customers taking advantage of provisions in the CRTC's wireless code that kicked in June 3 to allow all mobile subscribers to walk away from three-year contracts after two years without penalty — has had less of an impact than expected. "We didn't see any significant activity in the marketplace," Rogers' Staffieri said, adding that Rogers had been making "investments" earlier in the year in an attempt to retain wireless customers who were going to be in a position to switch carriers. Yet, he said the double-cohort effect "ended up being much less of an issue than we might have been worried about, quite frankly." Telus' Fuller said there has been a "heightened awareness" among customers about the new code provisions, though he added: "I would say the level of traffic, the level of interest around it is, if anything, a little bit less than what we had planned for, not significantly so." Fuller said Telus had been preparing for the double cohort, yet refrained from "crazy promotions" since competitors would surely match significant discounts. He said Telus is "exceptionally well situated" for the double cohort with its industry-leading low churn rate indicating that most customers are not keen on leaving the carrier. Wind Mobile CEO Alek Krstajik told the conference his company has not been aggressively marketing to capitalize on the double-cohort. "We haven't done anything overly disruptive, and part of it is if the vehicle is already accelerating, you don't need to step on the gas and burn gas unnecessarily," he said. "And we're in a position now where the business is growing nicely and we don't see a need to be disruptive." Krstajik said Wind continues to be interested in striking some type of deal with Mobilicity, the wireless carrier that, like Wind, got started as a result of the 2008 AWS spectrum auction. Mobilicity filed for bankruptcy protection in September 2013. "I'd love to do something with those guys," Krstajik said. Earlier in his address to the conference, Krstajik said that a fourth wireless carrier in Canada can be viable, but "anybody that funds a fifth wireless network in this country has lost their mind. ... There's no room for a fifth network." — With reporting by Derek Abma at dabma@thewirereport.ca and editing by Shruti Shekar at sshekar@thewirereport.ca

Rogers IPTV launch to coincide with skinny-basic offering

News | June 17, 2015

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