Former Cancom executives team up to challenge Telesat Canada’s monopoly

A new company headed by Richard Stursberg wants to be the first to deliver high-speed Internet to homes and businesses in rural Canada, but first it needs the government to follow through on its commitment to end Telesat Canada’s monopoly in the fixed satellite services (FSS) market (ROW, Dec. 21/98). That monopoly officially ended in March 2000, but to date, Telesat is still the only Canadian-owned satellite operator. On March 15, Bird Satellite Communications Inc became the first company to challenge that de facto monopoly with its application to launch two satellites into the 118.7 degree orbital slot. The only other company to respond to Industry Canada’s call for applications was Telesat itself. A March 14 study submitted as part of Bird Satellite’s filing says Canada has put in place the appropriate policy, legislative and regulatory framework to allow for FSS competition. "The only remaining step is to ensure that a well-qualified new entrant is granted access to the orbital slot resources necessary to compete," says the study by Charles River Associates and Michael Trebilcock, a law and economics professor at the University of Toronto. However, going with a start-up in an industry known for its high casualty rates and astronomical upfront costs is risky for a small country like Canada, Telesat warns. "We have a track record of over 30 years of service in Canada," says John Forsey, Telesat’s director of new satellite ventures and international coordination. "We have the qualifications and the skilled people that know how to procure, design and fly satellites. We’re on a strong financial footing, we’re not a start up." The risks haven’t deterred the people behind Bird Satellite. Stursberg likes to boast that he’s made a career out of competing with "The Bell", whether it be Bell Canada, Bell ExpressVu or its affiliate Telesat. While at Unitel Communications (now AT&T Canada), he fought to open up the long distance market to competition. "I’m quite focused on a little monopoly-busting with Telesat," he told Report on Wireless. Stursberg has teamed up in this new $1-billion venture with two other former Cancom executives, Scott Gibson and Andrew Briggs. "I figured we needed three things to make this happen," says the former president/CEO of Canadian Satellite Communications Inc (Cancom) and the Canadian Cable Television Association. "We needed some management, and we got some... Secondly, I needed a merchant banking partner. NB Capital Partners will be there to invest and to help raise the rest of the dough. Thirdly, I needed a technical partner. Loral will be taking a minority position in terms of the equity." Loral Space & Communications Ltd would build the two satellites and provide technical support to Bird Satellite. National Bank Financial Inc is acting as financial advisor for the project, which would see a C and Ku band satellite launched in 2003, and Ka-band bird in orbit by 2005. Stursberg says his company needs two satellites to ensure it has a back up in case of technical problems. Bird Satellite plans to act strictly as a carrier, wholesaling capacity to Internet service providers, telcos or direct-to-home satellite TV companies throughout Canada and the U.S. that want to offer high-speed Internet to existing customers in markets where DSL and cable modems aren’t available. Stursberg says it makes sense to deal with customers that already have a customer relationship with end users. "They’re the logical people to do the marketing and selling at the retail level." A study done for Bird Satellite by PricewaterhouseCoopers estimates that about 75 per cent of Canadians will have access to high speed Internet by 2003. That leaves some three million homes and 30 per cent of small businesses that will never receive high-speed Internet, except by satellite, according to the study. "That’s the opening market in Canada," explains Stursberg. "It’s a bit like the direct-to-home market. All those people who could never get cable because they were just too far out, if you’re direct-to-home, that’s where you go first, to the people who are television-deprived. These are the people who are broadband-deprived." What makes this orbital slot so valuable is its provision of C and Ku band broadcasting services and two-way broadband Internet via Ka-band throughout North America, although Telesat is limiting its Ka-band service to Canada. On the broadcasting side more capacity will be made available for digital television services. "By having the extra capacity at 118.7, it would open up capacity that might, for example, (be used) if they wanted to simulcast in HDTV," says Forsey. "Or the other thing may be just carrying more channels. As more and more specialty channels become licensed, there’s a need for distribution." Applicants must spend 2% of revenues on schools, hospitals How effectively the two applicants respond to Industry Canada’s benefits test will play a big part in the evaluation process. Two per cent of gross revenues must be committed annually to help bring broadband Internet to public institutions in underserved areas.Bird Satellite’s commitment works out to about $100 million over the 15-year lifespan of the satellites, or about $7 million annually. As for how that money would be spent, Bird Satellite plans to develop "stakeholder councils" which would focus on educational, health and aboriginal issues. Bird would spend about $1 million on a consultation process to identify the needs of the various stakeholders in rural and remote areas. "What is it they need?," asks Stursberg. "Do they need training, equipment, satellite capacity, networks designed? We don’t pretend to know the right answer right now. So we plan to talk to them and work with them to find out what the most sensible and intelligent way to spend that money is so that it will reflect their real requirements." Telesat won’t reveal the size of its benefits commitment until its application becomes public in a few days. Forsey says they plan to expand some tele-education pilot projects now underway into national programs. Industry Canada is under pressure to release its decision quickly, possibly by June.

Former Cancom executives team up to challenge Telesat Canada’s monopoly

News | March 19, 2001

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