Canada has almost 32 million people and roughly 2.1 million of the country’s 11 million-plus TV households (TVHHs) receive their direct broadcast satellite (DBS) signals either from Star Choice or Bell ExpressVu (BEV). By year-end 2003, the number of DBS subscribers is projected to grow another 300,000 to 2.4 million. The subscriber total then would approach almost one million for Mississauga, Ontario-based Star Choice and nearly 1.5 million for Toronto-based BEV. These projections give the high-powered BEV service a 62 percent projected market share, and the medium-powered Star Choice service a 38 percent share at the end of this year. This projection also represents slightly more than one-fifth of all Canadian TVHHs that will receive their multi-channel TV via DBS by the end of 2003.

Historical Developments

The first Canadian DBS system launched in 1997, when government control of spectrum issues was under the aegis of the Canada Radio-television and Telecommunications Commission (CRTC). The number of original CRTC DBS applicants was five, but the number of service providers have since been whittled down – as in the United States — to a mere two. These two, BEV and Star Choice, not only battle one another to retain existing subscribers and to acquire new ones, but they also compete with Canada’s cable TV companies, which serve over 8 million subscribers.

What is interesting in Canada, however, is that the cable provider Shaw has an investment stake in Star Choice. In addition, telephony provider Bell Canada has a significant stake in BEV. Antitrust laws likely would preclude such arrangements in the United States, but cross-investments are allowed in Canada.

Future Growth

The Carmel Group estimates that by the end of 2009 Canada’s TVHH households will total 13 million. By the end of 2009, the two DBS providers in Canada will have amassed a share of about one-third of those households. Canada’s 100,000 DBS subscribers at year-end 1997 would approach 4.1 million by 2009 to mark a compounded annual growth rate of almost 40 percent. That pace is a sizeable growth rate for any consumer electronics or telecommunications product and/or service. The accompanying charts help to highlight these growth trends.

Star Choice Options

For Star Choice, Canada’s second-largest satellite operator, its prospects are somewhat limited by the ties it has to an older, less modern technology: medium-power Ku-band infrastructure. Star Choice seems destined to struggle, based on the lessons learned in the United States. The U.S.-based medium-power services all succumbed to competition.

Since its earliest days, the challenge for Star Choice has been to justify the cost of a new high-powered satellite, and then to secure the necessary high-power Ku-Band spectrum that is necessary to launch a new service with smaller dishes and more flexible satellite spacing. Higher-powered satellites typically are capable of delivering their signals to smaller dishes than those of the low- and medium-power satellites.

For now, Star Choice has opted to stay with its medium-power service. The hope is that in much of suburban and rural Canada — spread over a vast country with a total of 3.6 million square miles — a significant number of subscribers won’t mind the bigger dishes, the required professional installation, and the somewhat more restricted satellite spacing and bandwidth issues. In the United States, it was exactly those kinds of competitive issues that hurt the medium-power services. On the other hand, Canada’s population density measures about nine persons per square mile – vs. 80 per square mile in America’s lower 48 states. Thus, what seems particularly competitive for a DBS provider in one country may not be so contentious in the other.

Launched in March 1997, Star Choice, like BEV, offers programming services in French and English. It, too, offers over 300 channels currently, and dozens of different package selections.

ExpressVu Bell Curve

BEV opted years ago to move up to a smaller dish, high-power solution, despite the higher infrastructure costs. As such, it is likely to offer a bell curve of its growth percentages that is much sharper in the earlier years and less drastic in the later years than rival Star Choice.

Reflecting that advantage, according to our projections, BEV will only lose a 4 percent market share during the next nine years to fall from 62 percent in 2003 to 59 percent by 2009. In fact, at its current rate of growth, BEV by 2009 will have more total subscribers in its system than the entire Canadian DBS industry has today. By contract, Star Choice’s 2003-2009 growth will be more modest, topping out at 1.6 million subscribers – one-third less – than BEV’s 2.4 million.

BEV is Canada’s fourth largest broadcast distributor of television content. Since its launch in September 1997, BEV has expanded to offer multiple services packages and a total of almost three hundred-channel selections.

The Gray Markets and Piracy

According to the Canadian TV Association, there are approximately 500,000-700,000 subscribers in Canada who steal their signals from satellite providers. Star Choice and BEV both suffer from satellite signal theft. The same problem afflicts DirecTV Inc. and EchoStar Communications Corp. [DISH] in the United States.

Back in the 1970s, Canada’s CRTC became concerned about U.S.-based C-band satellite signals spilling over into Canada and imposing a form of “cultural imperialism.” As such, laws were put into place making it illegal for Canadians to receive certain satellite TV signals and mandating that multi-channel video programming could only be received via cable, whether or not consumers received cable in their areas.

In 1995, the CRTC declared that no company would receive a license to carry DBS signals in Canada unless it was capable of offering at least 50 percent Canadian content on its service, compared to a 35 percent Canadian content threshold for cable TV providers. This is a good part of the reason why U.S. DBS companies are restricted in their efforts to market their services to Canadian customers. When Canadians violate the law by buying U.S. DBS systems in the United States, using fake U.S. billing addresses, then installing the U.S. systems in their Canadian homes, they become part of the so-called “gray market.” For U.S.-based DirecTV and EchoStar, this “gray market” exists today in Canada, Mexico and in some Caribbean countries.

Jimmy Schaeffler researches, analyzes and writes this monthly report. He is a subscription TV analyst at The Carmel Group, a publisher of industry databooks and the monthly newsletter DBS Investor, and a consultancy based in Carmel-by-the-Sea, CA (http://www.carmelgroup.com). The company specializes in telecommunications (e.g., cable, satellite and wireless), as well as computers and the media. He can be reached via e-mail at or by telephone at 831/643 2222.