George Cope, CEO, BCE Inc.
A new battle for Quebec is about to occur in the telecom world, as BCE Inc. signals it will not abandon la belle province to its rival Vidéotron Ltée, which is stealing BCE's customers there.
George Cope, BCE's president and chief executive officer, announced a strategy that would see Canada's largest telecommunications company dig into Quebec's soil to provide costly, but super-high-speed, fibre-optic connections straight into residences and businesses in a market that will be fought over and forever changed by year's end.
"We will put fibre in the ground," Mr. Cope said on a conference call with analysts on Thursday as his company issued a "conservative" guidance for the tough year ahead.
BCE is pushing an expensive rollout of "fibre-to-the-home" starting in Quebec City as part of a strategy it hopes will beat back Vidéotron in providing high-bandwidth-using services, such as high-definition TV and high-speed Internet. As competition in telecom increases throughout 2010, particularly as Vidéotron launches its own wireless network, it will be crucial for BCE to maintain its grip on lucrative households, which "bundle" multiple services together and pay large monthly bills.
"We think that Vidéotron is going to try to go at the throat of BCE," said analyst Maher Yaghi of Desjardins Securities in Montreal.
Vidéotron, a unit of Quebecor Inc. , spent $554-million on wireless spectrum and millions more building the network, which it will launch this summer. Mr. Yaghi said there are expectations that the company will add subscribers quickly - and do so by undercutting Bell Canada on the price of cellphone service.
Since 2006, Vidéotron has added more TV and broadband subscribers in Quebec than Bell; and since it launched residential phone service through its cable connections in 2005, it has gained 30 per cent of that market, according to data from the Convergence Consulting Group Ltd.
"It's been an incredible run for Vidéotron in Quebec," said Brahm Eiley, a principle at Convergence. "But Bell is rising to the challenge."
Canada's telcos are at a disadvantage in the battle with the cable companies, which have modern coaxial cable networks that support greater bandwidth use than the phone companies' copper wire. But just as BCE focused expenditures last year on building its advanced network that launched in November, the "star" of its approximately $2.45-billion capital expenditure in 2010 will be the fibre rollout, spokesman Mark Langton said.
This brewing struggle for market share is great for consumers, Mr. Eiley said, since it will result in faster connections and better customer service, starting as early as this time next year in Quebec City.
In the United States, carriers Verizon Wireless and AT&T have both built fibre cable networks. However, Verizon built the more expensive fibre-to-the-home network, like Bell plans to do in Quebec and later, Ontario, whereas AT&T built out a fibre system that connects to a local "node," but does not offer the same quality of service.
Greg MacDonald, an analyst with National Bank Financial, said that in the battle with cable companies, employing "node" technologies allows telecom companies to catch up in speed and quality. A direct fibre connection to homes is needed to offer the type of service that can pull more customers into the fold.
"They have to keep pushing fibre deeper," he said.
A comparison of Quebec market share between Vidéotron Ltée and Bell (including Aliant)
Quebec TV market: Vidéotron 62 per cent; Bell 21 per cent.
Residential broadband
Internet: Vidéotron 51 per cent; Bell 38 per cent
Residential telephone:
Vidéotron 30 per cent; Bell 62 per cent
Wireless: Vidéotron approx. 1.5 per cent (on Rogers Communications Inc.'s network; Videotron hasn't yet launched their
network); Bell 39 per cent
Source: Convergence Consulting Group Ltd.