Bell Express-Vu is one of the leading pay-TV operators in Canada and has close to 1.5 million subscribers. It is aiming to put the pressure on cable operators. Bell ExpressVu is owned by Bell Canada, the largest telco in Canada. This means there are some interesting dynamics given Bell’s attempts to derive revenues from the telephony, broadband and wireless market sectors. It also aims to be a key player in the TV over DSL arena as it looks to attack a market, which satellite has traditionally found difficult to penetrate.
However, while that market will be a growing focus, the main challenge on the television front will be boosting subscriber numbers for the satellite platform. In an exclusive interview with Satellite News International Editor Mark Holmes, the president of the video group at Bell Canada, Robert Odendaal talks about the digital television market in Canada and the role of satellite as it aims to eat into the market share of cable operators.
Satellite News: How many subscribers do you have in Canada? How do you view the potential for services such as PVR (Personal Video Recorder), HDTV (High- Definition TV) in the Canadian market?
Odendaal: In terms of subscribers, we are at 1.5 million, which has taken more than seven years. In fact, the early penetration of Bell ExpressVu in Canada is ahead of the United States and United Kingdom in terms of actual speed of penetration. In terms of HDTV and PVRs, our technology has based on the same proposition as EchoStar [DISH]. We have the most HD services in Canada with 25 channels across the country. We will shortly be introducing the first dual tuner HD PVR. In terms of PVRs, we were the first to introduce PVRs in Canada in 2001. We have recently introduced another PVR, which works in two different rooms of the household. It allows you to watch and record two different channels. I would say we are at the cutting edge in terms of introducing new technology into the market place. HDTV is obviously in use here a lot more than it is in Europe or even in the U.K. However, it is not nearly as much in demand in the U.S. where regulatory issues have been driving the agenda.
Satellite News: At the Euroconsult ‘DTH World Summit for Satellite TV Platforms’ in 2004, we heard some very impressive statistics in terms of BSkyB’s PVR strategy. How are you looking to develop PVR services? What kinds of business models are you deploying in terms of HD and PVR?
Odendaal: So far, we have actually retailed our PVR product. In terms of the business model, we have not used a rental model in quite the same way that BSkyB has used in the U.K. In terms of the capacity of the boxes, they have 120 hours of recording. There is no doubt that PVRs will follow the same lines of the computer industry. The hard disks will become larger and larger capacity, and you get a lot more bandwidth to be able to do things like potentially VOD for PVR. We have certainly looked at having charges for HD services. That goes toward the fair amount of costs, which go to support the migration towards HD services.
Satellite News:What are your views on telcos offering TV services? Is there room for DTH, IPTV and cable in terms of digital TV services in Canada?
Odendaal: Bell is a very interesting company, and perhaps in some ways unique anywhere in the world in terms of the assets it actually has. It has the ExpressVu digital satellite system. It has the largest commercial channel in the country, CTV. It has Telesat, the satellite operation. It is very diverse in terms of assets and the vertical integration it has with the companies within its portfolio. In terms of selling television content, we would be selling the content through the consumer part of Bell. BellExpressVu is part of Bell Consumer. We would be selling services through Bell Consumer. Historically, satellite has not been as effective as we would have liked in getting access to all the households, particularly in Multiple Dwelling Units (MDUs).
If you take Toronto as a typical city, 40 percent of people live in MDUs, and Bell ExpressVu has had very little share in supplying those MDUs. We have another technology DSL which allows to get into buildings. That implementation allows us to get into those buildings that we can gain services to each television set within those apartments. We can also offer high-speed Internet. That is totally complementary in terms of gaining distribution we otherwise we would not have had. It allows us to take on our competitors such as Rogers and Videotron head-to-head. If you look at wireline more generally, there are areas of wireline where VDSL is very economical to run into such as the smaller VDUs and even into family homes in denser urban areas where customers are reluctant to put up a satellite dish. So, again the different forms of distribution, which I am fairly agnostic to, allow us to get maximum reach.
Bell is in a very strong position having owned Bell ExpressVu. It knows how to distribute content. It knows about pricing and packaging, retail and distribution. This is no trivial task. So, therefore having experience within Bell ExpressVu, this will prove invaluable for Bell in being able to distribute content across wireline. The other telcos perhaps face different realities.
Satellite News: How are you looking to improve the channel line-up on the platform? What levels of growth are you forecasting for the next 12 months? How much are you going to invest in new programming and channels?
Odendaal: We recently reworked our Electronic Program Guide (EPG) to make it easier to use based more on themes. In terms of services, for example, we are adding third language services. We are working a lot more interactive services. The regulatory regime is very different here to the United States. It is not always easy to add content. There is a fair amount of protection on local services. RAI, the Italian broadcaster recently failed in a bid to gain entry into the Canadian market. We can only be so aggressive in this area. We can only add services as they become fully licensed by the CRTC, which is the regulator, but where there are opportunities to add content we do.
Satellite News: Could you describe the operator’s multiroom strategy?
Odendaal: I am sure we have a much higher penetration of rooms where you can watch services. It is an opportunity. As we break down analogue inertia, the key reason initially why people did not want to come across was because they had multiple television sets where they could gain cable services. So, we need to provide them with a replacement digital technology that does address that need.
Satellite News: What do you view as your competitive advantages over other pay-TV providers?
Odendaal: In terms of competitive advantages, I think we have many. We have an excellent brand. I think we have far better customer service than cable. We have great options in terms of the role we play in the broadband home and being able to bundle services together and give them the choice they want to have. We can also simplify the process. Our service is second to none. It is top notch in terms of technology and innovation. We were the first to introduce the PVR into the Canadian market. We were first to also introduce HD and dual room PVRs. The list goes on. We are also at the cutting edge in terms of interactive services. So, I think we have a lot more interest in serving our customer needs and they react to that.
Satellite News: Are you expecting revenue growth in 2004 compared to 2003? What are the major financial challenges for the company?
Odendaal: Yes, I would say we are expecting revenue growth. We have added more content, and there have also been price increases. We have also had a lot of activity in terms of persuading customers’ tot trade up their packages. There has also been more interactive content, which has boosted revenues. So, these are two of the reasons why I think revenues will increase this year. The company is a fully-owned subsidiary of Bell, so it probably does not face the similar financial packages of some of the standalone pay-TV operators. In terms of financial challenges, all platforms need to reach critical mass before they reach a positive situation in terms of Free Cash Flow and EBITDA. For us, I wouldn’t say it is a challenge. It is more of an opportunity to increase our subscriber base and really start driving some of those benefits that a critical mass allows you to do.
Satellite News: How are you looking to sell and market services in Canada throughout the next 12 months? How are you looking to boost Digital take-up in Canada and increase the ARPU figure?
Odendaal: We have been demonstrat-ing to our customers at the point of sale the benefits of moving from analog cable, which is a very old technology. Sixty percent of Canada has not moved across to digital yet. It is largely because they haven’t seen or been convinced by digital in terms of it being superior to analogue. It has been our task, and we have been very successful over the last few months where we are starting to see a breakdown of the cable inertia as people are starting to realise that digital satellite is profoundly different from analog cable. There are also factors like HD, interactive services, even an EPG. We are driving hard on our ability to differentiate ourselves from analog cable and even digital cable and this is part of our drive to gain new subscribers.
We have changed the EPG line-up recently so it is more based on different themes. We have changed all our packaging and pricing. The pricing structures simpler. There are no second STB fees, no connection charges. This, alongside our dual tuner PVRs and new packages was what we bought in, in September this year. We are encouraged from the results we have seen so far from the new approach and packages we have put in place. We are definitely on our second growth trajectory.
In terms of ARPU, we will do more in terms of PPV. We are looking at more interactive services and as we lift our game and drive better value propositions, we won’t be apologetic about charging for that. So, as we improve the service and make it better and better, we won’t be hesitant to push through price increases.
Satellite News: What level of churn do you have? How are you looking to improve this figure?
Odendaal: We are around the 11 percent mark for churn. This is the leading figure in North America. This shows the satisfaction of customers with our service.
Satellite News: Finally, how do you see the digital television landscape changing in Canada throughout the next 12 months?
Odendaal: I see that we will take more market share. The big push we have here, which is different from the U.K., is winning the broadband home. That is about getting to households and providing them with a full range of services (Digital TV, mobile, broadband, VOD). We are pushing very hard on that and you will see a lot more on that in the next year and that will push our market share up.
(Nathalie Moreau, Bell Canada, na.moreau@bell.ca)
