SaskTel faces industry & political foes in bid to compete in Saskatchewan cable market

The cable industry wants the CRTC to delay SaskTel’s entry into the cable TV market until proper safeguards are put in place to prevent the telco from subsidizing its cable rates with monopoly telephony revenues. A hearing is scheduled to begin October 30 in Calgary to review SaskTel’s application for a broadcast distribution licence serving several communities throughout Saskatchewan. Largest cablecos now serving SaskatchewanShaw CommunicationsAccess Communications Regional CablesystemsBattlefords Community CablevisionAt first blush, SaskTel appeared to be heading for clear sailing with its plan to use DSL (digital subscriber line) technology to deliver cable TV signals through copper lines to homes throughout the western province. Similar applications by NBTel and Maritime Tel & Tel (MT&T) cleared the necessary regulatory hurdles with barely a whimper from their industry rivals. MT&T’s bid didn’t even require an oral hearing. All three telcos plan to use similar technology to deliver cable TV and a host of interactive services to customers. But critics say the SaskTel situation is different. Not only is the telco owned by the provincial government, it also just recently fell back under CRTC’s scrutiny as a telecom carrier. Those two anomalies have given opponents hope that the commission will find reason to turn down the application. SaskTel’s proposed move into the cable TV market has already sparked a firestorm in the provincial legislature, with opposition MLAs questioning the fairness and appropriateness of having the government, with its wealth of resources, compete against the private sector in the rapidly growing broadband services market. "I think the opposition, and Access Communications, are going to try to argue that it’s unfair competition for the crown to be there," says John Meldrum, SaskTel’s VP corporate counsel and regulatory affairs. "They haven’t argued that the crown shouldn’t have a broadcast licence, they’ve just argued that they shouldn’t have to compete against the crown." The breadth of formal opposition won’t be known until October 5 – the last day interested parties have to file letters of support or opposition to SaskTel’s application. In an interview with Canadian Communications Reports, the Canadian Cable Television Association’s (CCTA) Suzanne Blackwell says work is well underway on their intervention. She declined to get into the specific details of its brief, but did outline what she viewed as the biggest hurdle SaskTel faces in convincing the commission to approve its application. "You’re talking about a company that just recently (June 30) came back under federal regulation," says Blackwell, VP economic research. "The commission has really only had the last year to start looking at their books. The ability to understand that they actually have everything in compliance for the appropriate tracking of broadband costs, that’s not an easy exercise." Over the past few years, telcos have been required to introduce complicated costing and accounting structures that ensure revenues from monopoly local telephone services do not flow to a telco’s competitive operations. Until these safeguards are fully in place, Blackwell says a company like SaskTel has "an obvious opportunity to do some subsidizing from that (local telephone) base. "I think it’s premature for them to get into broadband because they haven’t gone through those procedures to give the comfort level that we would be looking for." Finalizing those procedures could take another year or more, but Blackwell doesn’t see the delay as a major impediment. "We’ve only seen two relatively small telephone companies get into this – NBTel and MT&T. So I’m not sure that there’s such an urgency." Politicians debate government’s move in cable TV market If SaskTel’s application goes to an oral hearing, Meldrum says it will only be "because of the extent to which politics has entered into the debate." "I get this feeling that in Nova Scotia (with MT&T’s application), it was very quiet. And it has certainly been anything but quiet here," he told CCR. "As soon as it was announced, both the opposition and (Saskatchewan cableco) Access Communications came out swinging real hard saying the government shouldn’t be competing with private enterprise." But from SaskTel’s perspective, there is no legislation or regulation specifically preventing it from getting into either the broadcast or broadcast distribution business. In 1997, the federal government amended a 1985 Order-In-Council that changed the eligibility criteria for crown corporations. It’s an amendment that SaskTel argues was written with its company in mind, and one that allows the telco to get into broadcasting – assuming it’s not directly controlled by the government and independent from political influence. "If SaskTel doesn’t fit within the exception that’s described in that Order-in-Council, then nothing does," says Meldrum. SaskTel writes in its application that the Order-In-Council was passed "for the express purpose of enabling SaskTel to obtain a broadcasting licence." It goes on to say that operating control of SaskTel resides with its board of directors, and that its board membership is "diverse, free of political influence and has representation from various groups." Meldrum says he doubts this is an issue with the CRTC since commission staff didn’t ask any questions about control as part of its "deficiency" (Q&A) process. "I would have expected that if that was a major concern or issue of the commission they would have asked for more information in relation to the whole question of control and independence." Why cable TV, why now? SaskTel is no stranger to the cable TV market. Up until 1986, it owned and operated the outside plant for traditional cablecos in the province. Since then, it was licensed to operate a cable TV/telecom network in the U.K, and later in New Zealand. In Canada, the telco recently acquired a minority interest in Craig Wireless, a wireless cable TV operator. Rather than undertake a new build, as it did in the U.K. and New Zealand, SaskTel waited until advances in DSL made its installed copper plant a viable technology for delivering cable and other broadband services. "I guess the technology finally caught up with our appetite," says Meldrum. "I think we always had an appetite for it, but I guess it was a case of being able to do it at a reasonable price. Some of the larger telcos dabbled with building a new network, but I don’t think that’s economically feasible. Now that DSL has really gotten to where it’s at, we’ll be able to use our copper plant for something other than voice, data and the Internet." In its application to the CRTC, SaskTel proposes to bring cable TV services to nine Saskatchewan communities by the end of 2001, with Regina and Saskatoon coming online much sooner. Customers would be offered a bundled package of cable TV and high-speed Internet, that Meldrum says will compete with cable operators in terms of choice and price. "The incumbents have had a knack for taking the popular channels and putting them into the higher tiers to try to force more money out of the customers," he maintains. "I think we’ll have a hard look at that whole issue, and try to give people what they want more than what cable operators think they should be able to get out of their customers."

SaskTel faces industry & political foes in bid to compete in Saskatchewan cable market

Broadcast | September 28, 2000

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