Shaw eyeing VoIP, Quebecor downplays adding telephony in fight with telcos

Two giants in the Canadian cable market are singing different tunes about the potential of Voice over Internet Protocol (VoIP) as a way for cable to battle telcos on their own turf. In a reversal of its previous direction, Shaw Communications Inc. announced this month that it was looking at VoIP as part of a year-long process to review its options for introducing telephony. CEO Jim Shaw said during a conference call with analysts on the release of the company’s fiscal 2003 fourth-quarter and year-end financials that he was "cautiously optimistic" about VoIP, seemingly favouring it over circuit-switch deployment. Shaw’s stance last week is not only in sharp contrast to the company’s earlier direction but also to the views of Pierre-Karl Péladeau, the president and CEO of Quebecor Media Inc., owner of Quebec cableco Vidéotron ltée. Last December, Shaw indicated that he didn’t foresee entering the telephony market in the next five years, "unless there were a lot of technological developments." That’s Péla-deau’s current position. Appearing before the CRTC during licence renewal hearings for direct-to-home (DTH) satellite TV distributors Bell ExpressVu LP and Star Choice Communications Inc. a day before Shaw’s conference call, Péladeau downplayed the possibility of using VoIP to fight incumbents, such as Bell Canada, in the telephone market. Asked by CRTC chair Charles Dalfen if Quebecor might be able to use VoIP to fight Bell Canada, Péladeau responded that Vidéotron didn’t have the available capital to introduce the technology at this time. Instead, Péladeau used his appearance before the CRTC to blast BCE Inc., owner of both Bell ExpressVu and Bell Canada, for using its monopoly position in the telephone business to undercut its cable rivals. Repeating assertions of the past, Péladeau told the CRTC panel that BCE was pumping money from its telephone division into Bell ExpressVu solely to weaken cable operators so they wouldn’t be able to financially afford to enter local telephony markets. Péladeau said that Vidéotron was being forced to spend huge amounts of money to compete with Bell ExpressVu on the TV distribution side, preventing it from investing in telephony. Continued losses at Bell ExpressVu are an indication that the satellite TV distributor’s purpose is mainly as a tool to indirectly protect the telephony market from cablecos, he told the CRTC. During the hearings, however, Bell ExpressVu president Tim McGee indicated that the satellite TV distributor expected to generate positive earnings before interest, taxes, depreciation and amortization (EBITDA) by the end of next year. Péladeau told Canadian Communications Reports that he continues to hound on the cross-subsidization issue, even though the CRTC has already ruled in BCE’s favour on the matter (CCR, Oct. 10/02), to try to convince the commission that broadcasting and telecommunications can no longer be regulated under two separate Acts. "The point I’m making is that more and more the pieces of legislation governing the two silos (telecommunications and broadcasting) are merging. When we complained regarding this issue, they didn’t have any other choice but to look at it under the Telecommunications Act…But what I’ve been trying to explain is that everybody now overlaps in the same market. Before you had cable distribution and you had telephony. It’s not the case anymore. Bell coming from the telecom side, and Vidéotron, Shaw and Rogers coming from the cable side overlap on the Internet. Is Internet telecom or signal distribution? Obviously, this is telecom. And more and more the cable factor will dilute. We’re even talking about distributing cable signals through copper wire, with the former structure of telecom. So these two separate silos probably had some justification five, 10, 30 years ago, but because of the evolution of the technology they don’t anymore." He stood by the line that Vidéotron wasn’t looking at the VoIP option at this point, but conceded that it could be a possibility in the future. He noted that Quebecor doesn’t have the financial wherewithal to jump into VoIP at this time, but indicated things could change. "So is it going to stay that way forever? Probably not. But VoIP is not there yet. There is no company (in Canada) that is providing that service. But when and if this system is provided by cable distributors here, equipment prices should go down, and then conditions might become more appropriate to use VoIP," he said. It didn’t take Shaw, however, long to change its view of VoIP. One reason is probably that telcos have already entered the TV distribution business in Shaw’s home territory of Western Canada. SaskTel and MTS Communications Inc. have already launched digital TV services, and Telus Corp. is preparing to do so. During the conference call, Shaw said that senior VP of planning Michael D’Avella has been assigned to review Shaw’s options for adding telephone services. Shaw said he was encouraged by the positive results that U.S. cablecos, such as Cablevision Systems Corp. and Cox Communications Inc., were having with VoIP. "We ought to point out that we are watching with great interest the recent development in cable telephony and in particular the tremendous progress that has been made in Voice over IP, or VoIP, technologies. The recent launch of VoIP by Cablevision in New York, and the success that Cox is having with its triple play bundle encourages us to review our telephony options," he stated. "We’re cautiously optimistic. …That doesn’t mean that any decision has been made. It hasn’t. …And I guess right now, we don’t see any barriers on VoIP. …And because the (cable) plant is already running with the two-way capabilities with full data on and off, there would be no quality issues with it."

Shaw eyeing VoIP, Quebecor downplays adding telephony in fight with telcos

Broadcast | October 31, 2003

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