New Quebec TV distributor Colba.Net plans pricing attack

Calling itself ‘the Wal-Mart’ of communications services, Colba.Net Telecom Inc. plans to battle Videotron Ltd. and Bell Canada Enterprises Inc. on pricing with its new IPTV service in Montreal. On Oct. 13, the CRTC approved Colba.Net’s application to operate a Class 1 wireline television distribution service for the island of Montreal. The approval grants the company the ability to distribute any distant Canadian television signals, including Télé-Québec, the Aboriginal Peoples Television Network (APTN), and CBC/Radio-Canada, as well as American stations CBS, NBC, FOX and PBS. The company will also be required to provide high-definition signals of all local over-the-air stations to its subscribers. Originally founded as an Internet service provider, Colba.Net sells Internet and telephone services. The company offers high-speed Internet service via ADSL and ADSL2+ technology. The ADSL Internet can service all of Ontario and Quebec with speeds up to 5 Mbps, and its ADSL2+ network can connect up to 400,000 homes with download speeds of up to 24 Mbps. ADSL2+ is also suitable for high-definition IPTV services. Last month, Motionsphere Capital Inc. acquired Colba.Net in a reverse takeover. As a result, Motionsphere changed its name to Colba.Net and stopped trading shares on the Toronto Stock Exchange. Soon after that, the company began offering its shares on the Canadian National Stock Exchange. The company says it has between 5,000 and 8,000 broadband customers in total, including business customers. Its business is mainly residential in Quebec, but the firm has corporate customers across Canada thanks to its acquisition of some of CGI Group Inc., an IT service provider, in 2004. According to a company financial statement, Colba.Net’s revenue from April to June 2010 was $754,000, up from $653,000 in the previous quarter. Its operating income as of June was $28,000, but due to previous financial deficits of $1.25 million, the company was in the red by $1.24 million. Colba.Net president Joseph Bassili said in an interview that the company’s low prices will set its service offerings apart from competitors Videotron and Bell Canada. “We are the Wal-Mart of Internet, TV, et cetera. To give you an example, if you take Videotron, their 7 Mbps access is about $40 a month. And there is usage-based billing—if you exceed a certain amount of downloads, they charge you,” he said. “In our case, if a customer pays for a full year ... the 12 months would cost them $17.95 per month and there is an activation fee of $50 ... They can download as much as they want, at higher speeds than five, six or seven megabits.” Bassili said Colba.Net’s basic television package will also offer stations Videotron doesn’t have—but he wouldn’t provide details. “That, I’d prefer to keep as a marketing secret,” he said. Videotron spokeswoman Elodie Girardin said the company isn’t commenting on competitors’ services. Bell spokeswoman Marie-Ève Francoeur said the company is on track with the rollout of its IPTV service, Fibe TV, in Montreal and Toronto. Greg Taylor, a broadcasting expert in Montreal who is conducting post-doctoral research with Ryerson University, said there’s room in the Montreal market for a new television provider. “The revenues in this sector are pretty healthy,” he said. Taylor added that small service providers in other parts of the country could use the same “hot-rod DSL” technology that Colba.Net uses. “It does open the option to other smaller providers.” But Videotron and Bell have an advantage in the number of services they offer. The companies sell wireless as well as TV, Internet and phone, but Colba.Net doesn’t offer wireless. Taylor said the incumbents are likely to try to maintain that advantage. “I’d look to the spectrum auction coming up fairly soon,” he said. “That’s where the incumbents will really try to entrench their positions by buying some of the prime spectrum.” But Taylor added that the government could set aside spectrum for new entrants as it did during the last spectrum auction in 2008. Colba.Net hasn’t discounted the idea of offering wireless services. “We’re considering it,” Bassili said. “It’s expensive. We’d need to raise the money to buy the equipment, et cetera.” Although relatively small, Colba.Net will make its mark, Taylor said, adding that the competition will “certainly notice” the newcomer since many customers are dissatisfied with existing cable and Internet service providers. Taylor said he expects “an aggressive counterattack” from the incumbents. Greg MacDonald, director of equity research at National Bank Financial, said the incumbent companies have a size advantage. “My overall view of this business is it’s one of scale. You can see it in the extent that telephone companies are concerned about content costs and have therefore acquired content,” he said, pointing to Shaw Communications Inc.’s acquisition of CanWest Global Communications Corp.’s broadcasting assets, and Bell’s acquisition of television network CTV Inc. The bigger the company, the less expensive its content and network costs, he said. But if Videotron should be concerned about encroaching competition, Colba.Net may not be the company to watch out for. “Videotron should be worried about Bell Canada,” MacDonald said. “Bell Canada has scale and staying power.” news@thewirereport.ca

New Quebec TV distributor Colba.Net plans pricing attack

News | 10/22/2010 8:15 pm EDT

To keep reading, get a free trial.

Already a Subscriber?

Reuse & Permissions

Inside The Wire Report

Information

Hill Times Publishing

Get in Touch With Us