Distributel to launch IPTV to compete with incumbents

Distributel Communications Inc., the country’s largest independent Internet service provider (ISP), plans to roll out Internet protocol TV (IPTV) services to compete with the incumbents, Mel Cohen, the company’s president and founder, said in an interview. Cohen said the new service will position Distributel to offer bundled services and strip market share from the incumbent television and Internet providers. “I can’t tell you for sure that’s it 100 per cent a winner, but we have high hopes for it,” Cohen said of the planned IPTV service. “What is our next thing? We’re hoping IPTV could be it.” Independent broadcasting and telecom consultant George Burger, who works with IPTV interface supplier VMedia, told a conference of small ISPs this month that the time is ripe for independent, third-party providers to start offering IPTV services to compete for a larger slice of the country's wireline Internet and broadcasting subscribers. Cohen said the CRTC’s decision last year to move to a capacity-based billing regime for wholesale Internet services for smaller, third-party ISPs, makes IPTV a more viable option than it would have been under the previous wholesale usage-based billing regime. He said the capacity-based wholesale rates, to be established, will “absolutely” impact the smaller players’ abilities to offer IPTV services. “Capacity-based billing is far superior than total usage-based billing, where you measure every bite,” he said. “The problem is the rates are all over the place and there’s a lack of credibility.” The CRTC is reviewing eight separate complaints about the wholesale, capacity-based rates it established last November, and industry insiders said a decision is not expected until late December or early in the new year. Incumbent cablecos Rogers Communications Inc. and Shaw Communications Inc. have come under pressure this year to offset subscriber losses in their cable TV divisions as incumbent telcos Bell and Telus Corp. aggressively compete and grow TV customers with their fibre-based IPTV offerings in the cablecos’ territories. Siim Vanaselja, executive vice-president and chief financial officer at Bell, said at the Scotiabank Telecom & Cable 2013 Conference in Toronto this week that Bell is laying out fibre and IPTV as “aggressively” as its manpower will allow. Bell’s IPTV service will be available to 3.3 million homes by the end of 2012, he said. Vanaselja said Bell will soon introduce wireless IPTV installation to appeal to customers who are uncomfortable with technicians running wires through their homes. Paul Louro, vice-president of technology company Zazeen Inc., which is building Distributel’s IPTV product, said technological innovations over the last year have made IPTV solutions more affordable to small ISPs. He pointed to new, advanced tools for encoding and delivering online videos, as well as new set-top boxes, as products that “just weren’t available even as far back as one year ago.” Louro said Zazeen has partnered with Minerva Networks Inc., an IPTV interface supplier based outside of San Jose, Calif., to develop the platform that will allow Distributel customers to access IPTV content. He said Minerva will ensure the platform includes special services the CRTC requires all broadcast distributors to offer, such as video description, secondary audio programming, and personal video recorder (PVR) capabilities. “If you’re doing this from scratch, it’s not going to be done in a month or two,” he said. “You’re looking at potentially years worth of work.” Louro said it took Zazeen about a year to obtain a CRTC licence to operate as a broadcast distributor, which it received in October. In a telephone interview, Burger said it typically takes at least six to nine months to obtain a distribution licence from the CRTC, and another six to 12 months to negotiate with broadcasters for the rights to carry popular specialty channels. “You’re talking, essentially, about a two-year wait before you can get on track and get your business running,” he said of starting a new IPTV business. Zazeen is now negotiating with major broadcasters for the rights to carry their specialty channels, Louro said, and the company hopes to have enough deals in place to launch Jan. 1. “Yes, we might be missing some content still for another few months, but we’ll have enough competitive plans,” he said. The service will initially be available through Distributel and its Acanac Inc. subsidiary, though they plan to try to court other small ISPs, Louro said. Burger said VMedia, which is licensed as a broadcast distributor in the Greater Toronto Area and Kitchener-Waterloo, Ont., is shopping its service to small ISPs in the region and hopes to expand its service territory into the rest of Ontario and Quebec. IPTV will become “essential” to small ISPs going forward, Burger said, as they try to pry customers away from the discounted “one-bill solutions” that incumbents offer to consumers who bundle Internet, telephone and TV services. He said there are two key elements that an ISP needs to operate a successful service, including access to content and access to bandwidth. “Without both of those, they’re doomed,” he said. Cohen said it it may now be easier for small providers to secure channel carriage deals following Bell’s carriage dispute with a group of independent broadcast distributors this year, as well as the CRTC’s decision to block Bell’s bid to buy Astral Media Inc. The commission, in that decision, cited concerns about Bell's market power and reducing competition. “If you want to be obstructionist, it may come back to bite you in the ass,” he said of the way regulatory developments have affected Bell, Canada's largest vertically integrated communications company. Louro said the incumbents have an advantage over smaller IPTV operators due to their access to bandwidth. The incumbents can “multicast” their IPTV data, he said, allowing them to shorten the distance that data travels, cutting data transport costs. Small ISPs must unicast their data because they do not have access to the incumbents’ data exchange points, he said, estimating that the limitation means small ISPs would pay as much as $22,000 for 1,000 Mbps of transit capacity, enough to allow 400 different homes to watch IPTV programming simultaneously. “It’s definitely not as cost effective when you do it in a unicast platform,” he said. Tom Copeland, chair of the Canadian Association of Internet Providers (CAIP), said in an email that small ISPs will greet IPTV “with open arms” if they can attract bundled customers. He said IPTV will be important to small ISPs though it will not “be do-or-die,” noting that many consumers are moving away from subscription TV services to over-the-top, online services for their TV programming. nkyonka@thewirereport.ca

Distributel to launch IPTV to compete with incumbents

News | November 14, 2012

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