Telco threat looms for Canuck cablers

TORONTO — Canadian cable operators are so uptight about coming competition from the telephone companies that a light-hearted speech Monday by Ted Turner had pagers beeping.

The vice-chairman of Time Warner Inc. told Canuck cablers at their annual convention in Toronto to diversify their holdings or risk selling pencils on a street corner. As several listeners reached nervously for their cell phones, Turner tried to make it clear his remarks were largely tongue-in-cheek. But such is the fear in Canadian cable circles that it’s hard to take a joke.

There are genuine reasons for concern. With nearly 8 million Canadians hooked up to cable, the penetration rate approaches 90% of homes passed. That leaves little room for growth in basic service, yet pay services have yet to take off. Many urban Canadians have grown accustomed to an extended basic tier of more than 40 channels, so additional pay and pay-per-view services have been a tough sell. On average, Canadians pay less than Americans for their cable service.

Despite this high level of service, surveys show Canadians trust their telephone companies more than their cable operators. Since Canada has not followed the U.S. lead in breaking up the telephone monopoly, the Canadian cable industry faces a competitor more than eight times its size in terms of revenue.

Canada’s largest telecommunications conglomerate, BCE Inc. of Montreal, owns 71% of ExpressVu Inc., a digital direct-to-home satellite TV service due to launch this summer. It has promised to deliver a service competitive with cable. The CRTC has licensed a number of wireless cable companies which also threaten cable hegemony.

The cable industry sees its salvation in new services, such as high-speed cable modem Internet access and other interactive products. Yet against the unified telephone monolith, a divided cable industry cannot even agree on how to deploy digital technology.

Ted Rogers, president of Rogers Communications Inc. of Toronto, told the convention that the service must be 100% at the outset, or consumers will perceive cable operators as “tricksters.” Jim Shaw Jr., president of Shaw Communications Inc. of Calgary, argued that a partly-digital service must be put on the market quickly to respond to competition.

More than 2,500 delegates have registered for the convention, which wraps up Wednesday.

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