VMedia sets sights on incumbents as it expands outside Ont.

Ontario Internet service and television provider VMedia Inc. will expand to Quebec, British Columbia, Manitoba and Alberta in the next two weeks — a move the company says will see its services become available to about 75 per cent of Canadian households as it aims to compete with Canada’s largest telecom companies. “It’s a very substantial effort for us, because … we’re still largely a start-up company in many respects,” VMedia co-founder George Burger said in a phone interview Wednesday. “We are primarily focusing on the urban markets, because those are our limitations in terms of how we can effectively market,” Burger noted. VMedia began offering service in Quebec as of June 1, and will be available in B.C., Alberta and Manitoba by June 15, Burger said. In Quebec, it will be available to almost two million households in the greater Montreal area, which will be followed by other markets in the province. The company opened an office in Quebec and Burger said one challenge was to understand the specific needs of the Quebec market, and “to be able to reconfigure ourselves, to be able to give that market the attention and the kind of service it deserves.” All together, the expansions will increase “our potential market by about 70 per cent,” he said. VMedia considers its competition to be the big telecom companies, he said, adding that having its own television service is VMedia’s “unique advantage in the independent ISP market.” “Really, what we’re offering ourselves as is an alternative to the larger companies,” he said. Part of how it plans to do that is with lower prices, with its skinny basic priced at around $18. “As long as you can offer the quality, the pricing is really determinative,” he said. The company buys access to bandwidth on a wholesale basis in order to sell its services, Burger said in a follow-up phone interview. Because of that, “with respect to the English-speaking market, we really don’t have to establish much in terms of being able to reach those other markets.” The company has “obviously made investments in accessing the incumbents’ telecom services, so that we can provide Internet in those markets, but in terms of other resources, the only significant investment we’ve made has been to be able to effectively serve the Francophone market in Quebec,” he added. “Virtually everything else is run out of the existing infrastructure we have.” During a CRTC hearing in late 2014, TekSavvy Solutions Inc. CEO Marc Gaudrault told the regulator that it was interested in offering TV service, but that it couldn’t due to barriers like prohibitive wholesale bandwidth costs. When asked how it is that VMedia could afford to offer TV service when other companies couldn’t, Burger responded: “I can’t account for on how they arrived at those conclusions, but I certainly don’t think I should be telling them how I came to a different conclusion.” In response to a question about whether the company’s business model is currently profitable, Burger said that it was. “We make our margin on our customers, and we’ll continue to make our margin on our customers, whether they’re in Ontario or elsewhere,” he said. In March, the CRTC issued a new approach to how the rates small companies pay large telecoms for wholesale Internet services are set. The CRTC stated at the time that “current wholesale service rates are likely not just and reasonable.” Burger added the wholesale re-pricing process under way will “only be beneficial for us.” The recent decision by the government not to overturn a CRTC decision mandating access to fibre-to-the-home (FTTH) networks “gives us a lot more sense of a lengthy horizon for our business, rather than thinking that potentially we’re going to be terminally affected by being frozen out of the FTTH space,” he said. 3Macs telecom analyst Troy Crandall noted in a phone interview Wednesday that customers signing up for VMedia are charged for initial services the incumbents can offer for free, such as the set-top box, modem and installation. “So there’s some upfront investment from the subscriber required,” he said, adding that customers would have to stay subscribed for at least a couple of years to get value out of the subscription. “There’s a lot of ‘ifs’ there,” but Crandall said VMedia could potentially cut into the incumbents’ business “if they market it right, if they supply a really good product, if they’re on time, if they can keep their prices where they are or lower.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Charelle Evelyn at cevelyn@thewirereport.ca

VMedia sets sights on incumbents as it expands outside Ont.

News | June 1, 2016

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VMedia sets sights on incumbents as it expands outside Ont.

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