SaskTel, MTS both have HDTV – so where’s Bell, analyst asks?

Television over Internet Protocol (IPTV) took another step in its march to become a viable competitor to cable TV last week when SaskTel launched 27 high-definition channels on its Max digital TV service. And as the first provider in North America to deploy HD over IPTV, SaskTel is leading the telco TV charge from the Canadian Prairies. The launch of HDTV from SaskTel means that two high-definition telco TV offerings have become available in Central Canada in a period of less than two months; Manitoba’s MTS Allstream Inc. introduced its HDTV service at the end of August. While MTS’ offering isn’t exactly IPTV – it delivers television over an Asynchronous Transfer Mode (ATM) architecture – it’s nonetheless a wired HD television service from a telco, something that Bell Canada and Telus Corp., Canada’s two largest incumbent telcos, don’t yet offer. "In some ways it’s a bit of a mystery why MTS and SaskTel are so ahead of everybody else in doing this," says Jon Arnold, principal of independent IP communications analysis and marketing consulting firm J Arnold & Associates. "These two markets are not hotbeds of innovation, but at the same time they have their own distinct drivers that push them there. And both carriers have been very progressive in terms of rolling out services, not just in TV, but across the whole spectrum of multimedia." Indeed, while many carriers are set on establishing the triple- or quadruple-play, MTS and SaskTel offer subscribers a quintuple play of home phone, Internet, television, wireless and home security. While Greg Burch, MTS’ public affairs coordinator, consumer markets, says the telco didn’t launch its HD service just to keep up with competing cableco Shaw Cablesystems G.P, it likely factored in the decision. "Generally speaking, whether its cell phones, TV or whatever business we’re in, we want to give customers what they want, and there’s definitely demand for HDTV," he says. "People are increasingly buying the flat-screen, plasma-screen type monitors and they want the type of signal that will let them get the most out of their home entertainment system." MTS currently offers seven high-definition channels, which Burch says were selected based on what the company thought customers would want to watch. Not surprisingly, it’s a fairly obvious line-up of CBC, ABC, CBS, Fox, NBC, PBS and Rogers Sportsnet. The timeline for adding more channels to that list depends on the uptake. "We’ll see how the market develops and see what the response is and then go and get more channels as there’s capacity in the market," says Burch. However, up to this point the question with deploying high-definition over IPTV has been more about capacity on the network, not in the market. To those in the industry who had doubted that bandwidth-eating high-definition programming could be delivered over an IPTV network, SaskTel’s announcement of a 27-channel launch must have come as a surprise. Although an interview with SaskTel couldn’t be arranged by press time, a backgrounder issued by the telco last year explained how it was ramping up its network to accommodate HDTV. The company identified that it needed to reduce maximum loop length from 2.5 kilometres to 900 metres which would increase downstream bandwidth from 16 Mbps to 22 Mbps and allow it to upgrade to compression technologies like MPEG4. With earlier compression technologies like MPEG2, a single HD channel required about 20 Mbps of bandwidth, but MPEG4 needs only half that. Arnold suggests that the relatively small size of MTS’ and SaskTel’s subscriber bases (see chart on p.4) have helped them beat the large telcos to the TV market. "The scale of their needs is much smaller than what Bell would have to worry about here," he says. "There’s less risk involved in terms of different segments doing different things." But he offers other reasons why there is no Bell IPTV service yet, one being that the telco contracted Microsoft Corp. to deliver the platform for the service. " not alone in this one as Microsoft has had concerns about scaling anywhere, for any large partnership scenario they’ve been involved in," says Arnold. "So that raises a lot of questions with people: if a software-based solution like this can scale to mass market needs." And as more people question Bell about the future availability of IPTV, Arnold says they continue to say they’re not going to come to market until they get it just right. What is just right? At this point in time, could Bell, or any other telco for that matter, come to market with a TV service that doesn’t include high definition? "I don’t see why not," answers Arnold. With HD penetration still relatively low in Canada the biggest incentive for telcos to get a TV service in the market is stop the churn of their phone service to cablecos that have a telephone offering. Of course, Bell already offers satellite TV through its Bell ExpressVu subsidiary. Although satellite doesn’t bundle as nicely because it doesn’t interconnect with phone and Internet, it still gives them an existing quadruple-play. So just because MTS and SaskTel have already taken the second step in telco TV by rolling out HD, it doesn’t mean Bell is under any significant pressure to catch up. The nature of broadcast distribution in Canada is such that an incumbent like Bell need only concern itself with what the likes of Vidéotron ltée and Cogeco Cable Inc. are doing to its subscriber base. But at the very least, telcos from the Prairies are showing the rest of the country – and the continent – just what is possible on the IPTV front. SaskTel and MTS Allstream: shares in the telco TV market SaskTelMTSTotal digital TV channels offered220225High-definition channels offered277TV subscribers year-end 200542,00051,561TV subscribers year-end 2006 (projected)60,00065,000TV subscribers year-end 2007 (projected)80,00085,000SOURCE: The Digital Domain: Consumer Attitudes on Digital Television Services, Benefits and Features in Canada; Decima Research, November 2006

SaskTel, MTS both have HDTV – so where’s Bell, analyst asks?

Broadcast | October 24, 2006

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