BUSINESS

DIGITAL DISHES

Stay tuned: satellite TV is about to come to Canada

WARREN CARAGATA September 18 1995
BUSINESS

DIGITAL DISHES

Stay tuned: satellite TV is about to come to Canada

WARREN CARAGATA September 18 1995

DIGITAL DISHES

BUSINESS

Stay tuned: satellite TV is about to come to Canada

Sometime this fall, the skies will open and television will rain down from above. The long promised deluge of channels will be delivered by a sophisticated system of satellites and computers, all designed to make programs like Home Improvement and reruns of Murphy Brown look better than ever. Known as direct-broadcast TV, the technology has been enjoyed in various forms for years by viewers in Europe, Asia and the United States, but was held back in Canada by federal government regulators because it was seen as a threat to Canadian culture. With that obstacle now out of the way, major players are lining up their services and preparing to fight for subscribers. The biggest initial market for direct-broadcast TV, which allows homes to pick up over 100 channels with a 24-inch dish, is expected to be the 1.25 million homes who currently lack access to cable. But the cable industry will also feel some competitive heat. Many of its more than seven million customers are fed up with cable service and will be tempted to tune in to the larger selection offered by satellite. Says Dave Stewart, a partner in Ottawa’s Stubek Satellite

Communications: “People are calling because they are looking for an alternative to cable.”

The first taste Canadians will get of directtohome television will come from ExpressVu, which is promising to go on air later this fall. Two other competitors are in the wings, awaiting approval from the Canadian Radiotelevision and Telecommunications Commission (CRTC), which will begin hearings on their applications on Oct 30.

But consumers who hope that small-dish satellite TV will bring them a host of previously forbidden American channels are going to be disappointed. All three contenders, ExpressVu Inc. of Mississauga, Ont., Homestar, a service of Shaw Communications Inc. of Calgary and Power DirecTV of Toronto, will offer a similar mix of channels already approved by the CRTC. The cost for a dish and accompanying hardware will be about $1,000 plus tax. Then will come monthly charges starting from under $10, depending on the types of services selected.

Direct-broadcast television was supposed to be available across the country on Sept. 1, when ExpressVu had initially said it would begin operations. But that date fell by the wayside when the company, a consortium that includes BCE Inc. of Montreal and Canadian Satellite Communications Inc. of Mississauga, Ont., found it could not get enough space on the Anik El satellite, owned by Telesat Canada of Ottawa. ExpressVu blames the cable industry for delaying its launch, an accusation that is in keeping with what has become a nasty industry brawl. Ted Boyle, ExpressVu’s president, said in a company newsletter this month that the Canadian cable industry, which has its own plans for satellite service, had persuaded specialty broadcasters to delay their switch to new digital technology that would have freed up satellite transponder space and allowed ExpressVu to meet its launch date. Cable industry officials deny the accusation, saying they are being unfairly blamed for ExpressVu’s own failings. “They’re using the cable industry as a scapegoat,” says J. R. Shaw, president of Shaw Communications, Canada’s secondlargest cable company and the biggest shareholder in the Homestar consortium, made up entirely of cable companies. Industry analysts

say that Nov. 1 is the new target launch date.

But Chris Frank, ExpressVu’s vice-president of government and regulatory affairs, declines to name a date. Still, Paul Bush, dij rector of North American sales for Telesat, says that ExpressVu’s hopes are realistic for satellite space in the near future. About 70 per cent of existing customers using the needed Anik El transponders will be using digital \ compression by year-end, freeing up enough j space for ExpressVu to launch its service.

The third satellite player is Power \ DirecTV, a joint venture between Montrealbased Power Corp. and DirecTV, a Los Angeles-based company owned by GM Hughes Electronics Corp. Initially shut out of the market by the CRTC, Power DirecTV and its chairman, Joel Bell, waged a long, and ultimately successful, campaign to break into the market. It convinced the federal liberal government to order the CRTC to reverse its 1994 decision that gave ExpressVu a head start. Because ExpressVu’s services will be delivered solely by Canadian satellite, the CRTC allowed it to go ahead without a licence. Power DirecTV, on the other hand, uses both a Canadian and a U.S. satellite, and for that reason was obligated to apply for a licence. Although the government claimed its reversal of the CRTC’s decision was only meant to open the market to competition, opposition MPs noted that Power’s president, André Desmarais, is Jean Chrétien’s son-inlaw, and that Bell was an aide to former Liberal prime minister Pierre Trudeau.

Over the past year, while the regulatory and other battles raged, many Canadians who wanted direct-satellite service turned to the so-called grey market, using an American address to subscribe to TV services that are not licensed in Canada. Bell says the grey market probably robs Canadian companies of about $200 million a year, based on an estimate of about 500,000 backyard dishes. Most of those subscribers have older 10-foot dishes that can pick up signals from 18 or 19 satellites, although with poorer picture quality than that offered by direct-broadcast technology. They are people like a retired Ottawa public servant who spent $1,600 to get a rooftop dish that brings in 38 television channels, 27 CD-quality music channels, plus 99 pay-per-view channels. It costs him $40 a month, plus an additional $14 a month for five channels of Home Box Office. Before, he was spending $57 a month for cable. “We

weren’t getting value for money,” he says.

For its programming lineup, ExpressVu promises a basic package of the major Canadian networks, ethnic, native and educational channels, as well as CBC-Radio, for less than $10 a month. A full range of channels—similar to that of extended cable packages, plus 16 channels of commercial-free CD-quality music—will sell for $30 a month. There will also be 22 English pay-per-view and eight French pay-per-view channels available.

Homestar spokesman Michael D’Avella says his company plans, in addition to its basic television menu, 32 commercial-free music channels. There will also be 16 to 20 English pay-per-view and about 10 French pay-perview channels. DirecTV is being more coy about packaging and pricing, but says its system will carry about 48 TV channels, 12 music choices and about 70 pay channels. The wide choice of pay TV channels will be a key feature for many consumers—a “virtual video store,” says Bell. In addition, DirecTV and ExpressVu plan to offer Internet service to computer users, employing a combination of the satellite feed and a standard telephone line. One downside for buyers of satellite TV is that all three companies use different technologies. Customers who sign up with one service will be locked in unless they want to buy new equipment

All three services are going to be watching one another’s prices carefully. “We’ll be competitively priced,” says Bell. For his part, D’Avella says: ‘We’re going to price it to be competitive with the other guys.” But D’Avella, vice-president of planning for Shaw as well as the spokesman for Homestar, does have a caveat born of his association with a cable company: We are not going to price this to the point that we are cannibalizing our own.” Although Canada is one of the most cabled countries on earth, many people live in areas where cable service is poor, offering only a small number of channels and substandard picture quality. Bell says 500,000 potential customers live in areas where cable offers fewer than 20 channels. In the short term, says Glen Campbell, an analyst with Toronto brokerage firm Bunting Warburg Inc., poorly serviced Canadians, and those without any cable service at all, will be the prime market for the satellite companies. Thus, the industry should not, at first, pose a major threat to cable. “There’s no price advantage and no programming advantage,” Campbell says.

That, at any rate, is what the cable giants are hoping. But a recent study by the Yankee Group, a Bostonbased consulting firm, says that so far in the United States the direct-tohome subscribers are being drawn almost equally from cabled and uncabled areas. “After having being neglected by their cable operators,” it says, “cable customers are jumping ship.” The Canadians most likely to abandon ship are the people who can afford $1,000 and already subscribe to premium cable services— in other words, the very customers that the cable companies would be most reluctant to lose. As more people subscribe to satellite services, the hardware costs will come down, and that, Campbell notes, will start to give them some price advantage. That could convince even more cable subscribers to switch allegiance. But the big threat to the cable companies is yet to come. In a few years, the telephone companies are poised to begin offering television services, too. For cable consumers used to being monopoly prisoners, help is on the way.

WARREN CARAGATA in Ottawa

TV FROM THE HEAVENS

A sampling of the services that satellites will soon beam down to Canadians:

Homestar (79 channels)

• WPLG, ABC’s Miami affiliate.

• WUSA, CBS’s Washington station.

• KTVU, Fox’s San Francisco station.

• CNBC, the U.S. all-business news network.

• KTLA, Los Angeles superstation with 34 hours of movies a week, plus hockey’s Kings and baseball’s Dodgers and Angels.

• Four movie networks: Movie Max, MoviePix and TMN in English, Super Ecran in French.

• 16 English pay-per-view channels, eight French pay-per-view channels.

ExpressVu (133 channels)

• WSBK, Boston-based station affiliated with the new United Paramount Network, home of Star Trek: Voyager, also covers hockey’s Bruins, baseball’s Red Sox and basketball’s Celtics.

• WGN, Chicago superstation affiliated with Warner Bros.; also features both Chicago baseball teams, the Cubs and White Sox, and basketball’s Bulls.

• BET, Black Entertainment TV network.

• Viewer’s Choice and Home Theatre movie channels, plus a French pay-perview movie network.

• 22 digital, commercial-free music channels, including country music and heavy metal channels.

Power DirecTV (48 channels)

• KRMA, Denveds public broadcasting station.

• WRAL, CBS affiliate in Raleigh, N.C.

• WTBS, Atlanta station owned by Ted Turner, with coverage of baseball’s Braves and basketball’s Hawks.

• Five movie networks, Movie Max, MoviePix, Super Channel and TMN in English, Super Ecran in French.

• 70 pay-per-view channels.