Kincardine Cable fighting DTH providers for customers

While Canada’s largest BDUs duel it out over the question of multi-address subscriptions (CCR, May 4/06), one smaller cable operator is waging a much grimmer fight against the practice. Bryan Walden, president of Kincardine Cable TV Ltd., a small cablesystem servicing the town of Kincardine ON on the shores of Lake Huron, says his business has been badly hit by cottage-owners taking their satellite equipment to the cottage with them. Worse, he says the problem has now graduated beyond part-time residents taking advantage of the loophole in the language of the Broadcasting Distribution Regulations, and now full-time satellite subscribers split or stack their satellite TV accounts with neighbours, renters and relatives to avoid paying subscription fees. He estimates that as many as 50% of the cottages and second addresses in his service area import service from elsewhere, and up to 5% of local subscribers stack accounts, negating the need for a local cable subscription. The loss of revenue has had an immediate impact on Walden’s business, including a hiring freeze. "Without the staffing we haven’t been able to do everything we want to do," he says. "What we’re missing is money and staff: without money I can’t hire staff, and without staff I can’t deliver the level of service I want to deliver." Both Star Choice Communications Ltd. and Bell ExpressVu recently told Canadian Communications Reports that they have policies allowing subscribers to temporarily relocate their dishes and receivers in another location, without having to pay for a second subscription for that address. This business practice is what has given so many subscribers the opening they needed to avoid their cable TV and satellite TV fees. Indeed, Kincardine Cable had a similar policy a decade ago, Walden says, and offered cottagers a deal: pay for only six months’ worth of cable during the summer months while they’re at their vacation property, but have service connected all year so that cottage-owners could save on connection and disconnection fees. However, Walden says, Bell Globemedia’s The Sports Network (TSN) – after previously approving the cableco’s arrangement for part-time residents – began to demand a year’s worth of payments for these subscribers. If Kincardine Cable failed to collect and remit the payments each fall, TSN threatened to disconnect the customers, he says. Finally, TSN also demanded $20,000 in back payments for the revenue it claimed it lost over the five years the policy was in effect.Walden then pled his case to the CRTC, arguing that the demand for five years back payment was unfair and arbitrary. The commission refused to hear the matter, however. "That cut the legs out from under us," Walden says. "When the large companies are there they get 10 times the time to speak. When the little guy is there, no one listens. So, we paid TSN immediately or they would have turned off their service to our customers." In the case of at least one small cableco, Walden says, the issue of satellite subscribers bringing their dishes to the cottage and other locations with them played a major factor in its demise. Saugeen Telecable Ltd., which served 20,000 basic cable subscribers in southwestern Ontario, went into receivership in February 2003, and its assets were acquired by Persona Communications for $12.9 million later that year. Walden states unequivocally that if satellite subscribers had not stacked or split their accounts in Saugeen’s service area, the company could have avoided bankruptcy. However, Walden says the biggest loser in the multi-address subscription tug-of-war might be the specialty channels, due to their per-subscriber fee structure: the fewer paying subscribers on a system, the less money is remitted to specialty programmers. With Decima Research Inc.’s Digital Domain report pegging the number of Star Choice and Bell ExpressVu subscribers at more than 2.5 million in August/September 2005, he says specialty channels are losing millions – as much as $9 million a year or more, based on an assumed $15 a month remittance per subscriber – even if just 2% of DTH subscribers are receiving service at multiple addresses. Of course, Kincardine Cable has expanded beyond basic and tiered cable TV services over the past few years, and now offers broadband Internet access as well. "The only thing that’s saved us has been Internet ," Walden says. With nearly 45% of cable TV subscribers now taking the additional broadband service, "Internet has been very good to us," he says. Walden would also like to offer digital telephony in the area, but says that with four independent telcos operating in his service area, he can’t get number portability for subscribers. "That has really handcuffed us," he says, adding that he’s been advised that the lack of number portability could be resolved, but the process might take as long as 24 months. "Well, in 24 months the telephone guys are going to be launching video in our market," he says, saying he has heard rumours that video over DSL will be available this summer in the Kincardine area. Regardless, revenue from services such as Internet and telephony, if Kincardine Cable eventually launches the service, can’t grow fast enough to make up for the broader loss of basic cable income. "I can’t compete against free," Walden says.

Kincardine Cable fighting DTH providers for customers

Broadcast | May 19, 2006

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