[LINK] Why Canadian Cable Companies and Telecoms Are in Trouble

[Kim Holburn]

Fascinating article about Canadian ISPs and competition.  Not directly relevant to us since we have severe bandwidth caps already for another historical reason.  Also shows one direction where faster broadband is going - ie IP TV.

http://seekingalpha.com/article/269531-why-canadian-cable-companies-and-telecoms-are-in-trouble

> Major competitive threat from web-based firms
> 
> Even without liberalization, Canadian firms’ offerings are already being out-classed by web-based companies. For example, Rogers charges $7.99 for a single viewing of an HD movie through its Rogers On Demand service. For the same $7.99 Netflix (NFLX) offers unlimited viewing of a large catalog of HD movies for a month. Unsurprisingly, Netflix subscriber growth in Canada has been robust since it entered the Canadian market, even without any prior brand presence from a legacy DVD delivery service. Indeed, Netflix growth in Canada has been far quicker than it was in the United States, and subscriptions are expected to soon exceed 1 million, or 7.5% of Canadian households.
> 
> Meanwhile, Blockbuster (BLOAQ.PK) Canada has filed for bankruptcy just over six months after its parent company in the US. The trend toward low-cost subscription movie services and away from high-cost per-movie rental services appears unlikely to reverse any time soon in Canada.
> 
> Yet, no Canadian firm has announced any plans to introduce a low-cost subscription viewing model to become competitive with Netflix. Instead, the response of incumbent cable companies has been to lower caps on internet usage (typically around 25 GB per month, or one tenth of Comcast’s (CMCSA) 250 GB usage cap), and to enforce per-gigabyte charges on internet use above the cap of $2 to $5 per gigabyte in an apparent attempt to inflate costs for Netflix customers.

> The incumbents have made their own far more expensive internet video offerings exempt from the bandwidth usage caps and overage charges. Netflix has responded by adding a “low quality” option which uses less bandwidth, out of consideration for Canadian customers who are trapped inside restrictive usage caps and face punitive overage charges. The company has also apparently stepped up its lobbying efforts in Ottawa.

....

> These attempts to stifle competition and protect their own market share have alienated many of incumbents’ own customers, prompting them to switch to competitors who offer unlimited internet packages. Incumbents have tried to convince the regulator to eliminate the ability of any firm in Canada to offer unlimited internet packages for residential customers, but this was met with a powerful wave of public and political opposition including a petition that went viral earlier this year, and culminated in a rare intervention by the Minister of Industry to stop the CRTC from allowing Bell to effectively impose usage based billing on the entire country.

> Charging $2 to $5 per gigabyte to Canadian consumers for internet use in “usage based billing” schemes has been very profitable for major Canadian firms, and in some cases has been the main driver of revenue growth in the internet service business. But this has only been possible because of laws which prevent competitors from abroad from entering the Canadian market and eating the incumbent firms’ lunch. Shaw and Telus have indicated within hours of each other that they too will be introducing the hugely unpopular practice of capping and charging per gigabyte, following the lead of Bell and Rogers which have been doing this for years.

.....

> Adding to the risks faced by incumbents is growing discussion of functional separation, or breaking up these vertically integrated behemoths to reduce conflicts of interest inherent in having companies that sell content also maintaining regional monopolies or duopolies on network access. And perhaps even more problematic is the growing proportion of adults under 35 who do not have a cable subscription and do not intend to get one, since they obtain virtually all their video entertainment, including TV shows, sports and movies through the internet.
> 
> Compounding this revenue-killing dynamic for Canadian broadcasters is the fact that young people in Canada are increasingly tech-savvy. Many, it is reported by senior executives at Shaw, already bypass the Canadian broadcasting system entirely by using one-click proxies, DNS spoofing services, or other methods to watch video content from lower-cost and/or higher quality content providers outside Canada, confounding any attempts to “geo-block” Canadian internet users. Growing numbers of Canadians now watch the Daily Show, Mad Men and House directly on US websites, cutting out Bell, Rogers, Shaw, and other Canadian middle men.



-- 
Kim Holburn
IT Network & Security Consultant
T: +61 2 61402408  M: +61 404072753
mailto:kim at holburn.net  aim://kimholburn
skype://kholburn - PGP Public Key on request