Cablecos Ramp Up Business Services

They’re ready for you. Are you ready for them? There’s more to the cable television industry these days than Canadian Idol and daytime talk shows. As barriers fall between the traditionally distinct monopolies of telephone carriers and cable companies, major cablecos are putting more emphasis on services for business. But like Idol wannabes, they have to convince some tough judges that they’re ready for prime time. Of all Canada’s major cable companies, Rogers Communications Inc. has the longest established presence in the business market. Of course Rogers, with its mobile phone business and other interests in publishing and television, is more than a cable company. "Rogers has been offering business services now for the better part of 20 years," observes Iain Grant, managing director of technology research at consulting firm SeaBoard Group in Montreal. "They are serious about it." That’s just what Randy Reynolds says. Reynolds, a Bell Canada veteran who recently became president of Rogers Business Solutions, says the company’s acquisition of Sprint Canada last year signals greater focus on business services, which he says generate more than $1 billion in annual revenues for Rogers today. Rogers is a major player in wireless telephony. The Sprint acquisition has helped give the company a strong presence in wireline telephony as well, but Reynolds says his primary focus is on data services – though, he hastens to add, "not to the exclusion of voice." Reynolds admits his company lacks the scale of the major incumbent telephone carriers, but he argues that with the assets picked up from Sprint, and the ability to use resale arrangements with other cable companies and even incumbent telcos to supplement its own network, Rogers has substantial reach. And, he contends, "I think we’re a little bit farther ahead than the competitors in integrating our approach to the market between wireless and wireline." Ultimately, Reynolds says, "we would like to be…the number-one alternative to the ILEC in every market across the country." Videotron Ltd. has also shown serious interest in wooing business customers. In January, the Montreal-based company rolled the operations of Videotron Telecom Ltd., a 16-year-old telephony business owned by parent company Quebecor Media Inc., into its sister cable company and then created a new division called Videotron Business Solutions to provide telephony, Internet access and hosting, high-speed data transmission, and of course cable television services to business customers. Videotron Telecom had offered telephone service to large businesses over its own fibre-optic network since 1989, winning over some major companies such as Bombardier Inc. and Alcan Inc., says Jean Novak, president of the newly created Videotron Business Solutions. It had expanded into offering high-speed Internet and other data services to the same business customers. More recently Videotron Ltd. began offering Internet services to businesses through its coaxial cable network. Merging the two operations, telecom and cable, will allow for a broader range of services, Novak says – for instance, Videotron Business Solutions now has the choice of using optical fibre to provide high-speed Internet and data connections or supplying lower-speed connections over Videotron’s coaxial cable infrastructure. And Videotron is in the midst of launching a new telephone service using the cable network. Videotron’s strengths lie in the small to medium-sized business market, says Carrie MacGillivray, an analyst at research firm Yankee Group in Ottawa. "I think their focus is going to be on the SMB market and trying to take the really small SMB and introduce more services." Grant thinks the company is shifting its focus to include smaller businesses, a market space where experience in the business market might be less of a necessity than in serving bigger enterprises. MacGillivray agrees. "They just haven’t played in that space," she says. "They don’t have a track record yet." Novak, however, points to customers like Bombardier and Alcan in arguing that Videotron does in fact have a track record with bigger companies – though he admits that his company still has some work to do in getting that message out. "Bell has been in the business for many years and they’re very well known," he says, adding that Videotron plans to promote itself more aggressively. While Rogers and Videotron have the most developed strategies in the business market, other cable companies are pursuing it as well. Not satisfied with depending on infrastructure leased from other firms, Shaw Communications Inc. built an extensive high-speed fibre-optic network at the end of the 1990s to provide Internet access for subscribers to its cable-modem Internet services. Then the Calgary-based company took advantage of excess capacity on that network by providing high-speed Internet access services to business customers. That business became Big Pipe Inc. in July 2000. Jerrold Laird, Big Pipe’s marketing manager, says the company focused for the first couple of years on high-speed Internet access. Around 2003, it broadened its offerings to include wide-area networking services for business customers. Today Big Pipe can provide inter-office links at speeds from 10 Mbps up to multiple gigabits, he says. Many of its customers are smaller cable companies and other local Internet service providers – firms that would rather not rely for Internet access on the incumbent phone companies, which count as their principal competitors – but providing wholesale telecommunications services to other companies is a growing part of Big Pipe’s business. Montreal-based Cogeco Cable Inc. offers high-speed Internet service to business customers, and Grant says the company serves some markets – such as Burlington and Kingston ON – that have good potential for business services. The Halifax-based EastLink group of companies expanded from cable television into telephone service in 2000, and after focusing exclusively on the residential market for about six months, soon began pursuing business customers as well. The company offers phone and Internet services in large parts of Nova Scotia and Prince Edward Island and a small part of southeastern New Brunswick, and provides IP-based point-to-point and multipoint data services over its fibre network. David Caldwell, the company’s senior director of business services, says EastLink started in the small-business market, which still accounts for a sizeable share of its business customers, but the company has been working its way up to larger enterprises. Breton Business Centre, a Sydney NS, company that operates a telephone answering service and monitors security systems, switched from incumbent Aliant Inc. to EastLink a little over a year ago. Graham MacDonald, Breton’s sales and marketing manager, said the company needed an optical fibre connection for a new alarm monitoring system and Aliant’s prices were too high. EastLink quoted $4,000 per month less than the phone company, he said, and sent a team out from Halifax to meet with Breton. "They spent the day down here," MacDonald said. "Aliant just gave me a quote over the phone from a sales girl in Halifax." Grant, however, says EastLink’s headway in the business market has been disappointing so far. He blames the fact that its operations are confined to the less urbanized Maritime provinces. "It’s rather harder to provide telecommunications services in a smaller geography in isolation," he says. Caldwell will not say what portion of EastLink’s revenues come from business customers except that its residential business is larger, but he claims the company has met its expectations so far. Grant says knowledge of the big-business communications market and technology is a significant issue for all the cable companies. But lacking the incumbent telephone carriers’ years of experience might not be all bad, he adds. "Because they don’t know the technology, they don’t necessarily have an existing investment in something which is yesterday’s answer." So as relative newcomers, the cable companies could set themselves apart through innovation. Like any new competitors, though, they are fighting uphill battles against entrenched incumbents with deep pockets, extensive networks and high visibility to customers. "Awareness that we’re in the telecom business and that we’re in it for business services was probably our principal challenge," EastLink’s Caldwell says. Outside the wireless sector, Reynolds says Rogers has been strongest in the mid-sized business sector in the past, but is building on its experience with mid-sized businesses and its wireless foothold among larger companies to expand its presence among bigger customers. The company has recently signed deals with large retailers, government departments and other large clients, he says. Caldwell says the present regulatory environment is fair to cable companies going up against incumbent telcos in the business market, but "it’s always difficult to compete in a market that has once been a monopoly. Your competitor has an incumbent position and a reach that is everywhere," plus deep pockets and a wide range of services. Can Canada’s cable companies overcome those obstacles to become major players in the business market? Stay tuned.

Cablecos Ramp Up Business Services

News | April 1, 2006

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