Cable VDN’s Toronto expansion plans could mark move into other markets

Montreal-based Cable VDN Inc. has applied for a Class 1 cable licence to serve the multiple unit dwelling (MUD) market in Toronto in what could be the start of expansion into further cities. The company plans to piggyback on existing fiber connections it has to extend the TV service it offers in Montreal to Toronto. Gary Sherman, director of legal and regulatory affairs at Cable VDN, tells Canadian Communications Reports that the company "wants to start small and establish a base in Toronto" of about 10,000 customers, the same amount it has in Montreal. "I think it is important to show that we are not limited to one market, that we have a service that we can bring to a bunch of different places. Showing we can bring it to Toronto is showing we can bring it anywhere pretty much that we want," says Sherman of Cable VDN’s application for a licence to operate a broadcast distribution undertaking (BDU) in Toronto that was gazetted by the CRTC on August 5 (Broadcasting Notice of Public Hearing 2004-8). Written comments on the application are due September 9, and the matter will be considered at a public hearing on October 4. He adds, "Once we’ve done that (gotten established in Toronto), we can look at other things as well. We offer a whole range of services - commercial and cable TV. We’ve got services going to Ottawa as well, but at this point we’re not applying for a cable TV licence there." In its application, Cable VDN states that it will only need capital of about $600,000 to bring its cable TV service to the Toronto buildings it has targeted. "…VDN currently has an operational multiple gigabit Ethernet-compatible network between Montreal and Toronto. This link can be provisioned with its current configuration to enable NewCo (a subsidiary of Cable VDN that will operate the Toronto system) to receive VDN’s entire digital headend signals from Montreal without significant cost or additional infrastructure," the application reads. The Montreal cableco also indicates that it now has enough digital satellite receivers, modulators, combiners, satellite dishes and racks for two complete headends. It has a headend already in Montreal and it anticipates building a second in Toronto, if it gets licensed for that market. The Toronto system will use state-of-the-art digital technology, and offer customers high-definition and digital channels from its launch date, the company says. Sherman adds that the company plans to offer a digital service as well in Montreal in September. Cable VDN tells the CRTC that it will target buildings with Satellite Master Antenna Television (SMATV) systems, or those with numerous grey or black market TV customers. "Soon after receiving its Class 1 CRTC licence (for Montreal in 1997), Cable VDN Inc. was very successful in repatriating viewers to the Canadian broadcasting system. A number of SMATV systems in Montreal had been providing viewers with ‘pirated’ U.S. programming services. Within two years, VDN had converted 10 of such SMATV systems over to our cable network," the cableco tells the CRTC in its application. "We have identified a number of buildings in the Toronto area which are currently unserved by (legal) Canadian BDUs. We are confident that the expertise which our management team has gained over the past seven years, will result in repatriation of consumers to the Canadian broadcasting system." The number of households within the area of Toronto that Cable VDN proposes serving is 943,000, the application states. Cable VDN estimates that about 85% of those households are already serviced by existing cablecos, direct-to-home satellite TV distributors, wireless cable, or SMATV. SMATV systems consist of antennas set up by building owners or condominium associations to receive TV signals. Because the TV service is not being sold to outside sources, the owners do not need a broadcast distribution licence to legitimately distribute CRTC-approved channels. But Sherman says that services like the Internet cannot be provided through SMATV, and that it can’t provide any kind of digital service, or high-definition channels, and is limited in the number of channels that can be distributed. Cable VDN anticipates charging a monthly fee of $21.99 for its cable service, with the typical installation fee set at $50. According to financial projections filed with the CRTC, Cable VDN anticipates losing $20,100 in its pre-operating period, and registering a loss of $70,166 in its first year of operation. However, it anticipates earning $894,174 in its second year, and netting a profit of $33,430. By the seventh year of operation, it forecasts earning $10.04 million and generating $6.21 million in profit. Sherman notes that Cable VDN has its sights on specific Toronto buildings, although he would not specify how the company chose them. He says the company will not target buildings under construction, at least during the company’s early stages in the Toronto market. With the Cable VDN application, competition appears to be heating up in the MDU market in the Ontario capital. Bell Canada has also applied for two Class 1 cable licences, one of which, if granted, would allow it to provide TV services over wireline to Toronto (CCR, July 30/04). As well, Bell ExpressVu LP is attempting to go head-to-head with Rogers Communications in the MDU market, but its lack of progress has led to the direct-to-home satellite TV company filing complaints with both the CRTC and the Competition Bureau (CCR, July 31/03). Cable VDN hopes to distinguish itself from its competitors in the Toronto MUD market by focusing on the Francophone community. It notes that as a TV distributor in the Quebec market, it has the expertise to tailor to the "under-served community of Francophones living in Toronto" by providing a full range of French channels at a reasonable cost in well-thought out packages. "…We are particularly sensitive to the needs of a large under-served Francophone community living in Toronto. Using the experience gained from serving the Montreal community and the innovative use of our fibre-optic technology which currently exists between Toronto and Montreal, we are able, immediately, to provide Toronto-area Franco-phones with a wide variety of programming services," Cable VDN president and CEO Philip Gale writes in a March 31 letter to the CRTC. "We believe the licensing of NewCo is complimentary to the commission’s goals on competition in the cable television industry as well as to the goals of the Coalition Against Satellite Signal Theft (CASST)," concludes Cable VDN.

Cable VDN’s Toronto expansion plans could mark move into other markets

Broadcast | August 17, 2004

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