After years of false starts and an expensive write-down, Rogers Communications Inc. has finally launched an internet-based television service in a bid to woo more high-paying customers, and stem the flow of “cord-cutters” from cable TV.
Rogers spent half a decade trying to build a new television service to replace its outdated cable boxes with something that could compete with the internet protocol television (IPTV) that BCE Inc. had been offering since 2010. BCE’s Fibe TV gave it a non-satellite option for urban markets with features such as the ability to pause and restart programs on different devices, as well as later offering wireless set-top boxes.
By December, 2016, Rogers called time on the in-house effort, championed by former CEO Guy Laurence, announcing a plan to partner with U.S. giant Comcast Corp. and license its cloud-based X1 TV platform. The move came with a $484-million writedown on the value of Rogers’s previous development work and delayed the launch of a new product even further.
This summer, after months of employee trials, Rogers has started to roll out its new product to customers across its service footprint in Ontario and will launch in Atlantic Canada next year. Dubbed Ignite TV, it comes with a diminutive set-top box (smaller, because the data and content all reside in the cloud), a voice-activated remote and also features an all-in-one hub of content, making it simple to find TV shows and movies whether they’re on traditional stations, on-demand services or Netflix.
Rogers’s launch comes as the market for traditional television service is shrinking as more consumers “cut the cord” in favour of online options (TV subscriptions in Canada declined by 4 per cent between 2015 and 2016, according to the latest data from the Canadian Radio-television and Telecommunications Commission). But a competitive TV service is still seen as an important asset for telecom providers looking to “own the home” by persuading subscribers to sign on for high-speed internet (a requirement for IPTV platforms) as well as other residential services such as security systems and smart-home solutions.
“People cut the cord, but they’re not giving up on entertainment itself,” Phil Hartling, president of residential services at Rogers, said in an interview. “We think the value proposition in terms of easy access to the content that you want will make the difference for people who have dropped traditional television.”
He said partnering with Comcast, which has 10,000 employees working on the X1 platform alone, gives Rogers the advantage of scale it could not achieve on its own. Comcast has also licensed the product to Shaw Communications Inc. and Quebecor Inc. (Shaw launched BlueSky TV in early 2017 for its customers in Alberta and B.C., while Quebecor’s Videotron division is still working on its own launch).
Rogers will have access to future product innovations from Comcast, including the Philadelphia-based company’s plans to integrate home security and smart-home automation (to control lighting and heat, for example) directly into the platform.
BCE has made some recent improvements to its Fibe television service, such as allowing users to download recorded content to their devices and take it on the go. It also signed a long-term deal in January to keep working with Ericsson Co., which provides the IPTV platform (subsequent to that deal, private equity firm One Equity Partners bought a majority interest in Ericsson’s media technology division, which is now called MediaKind). But Rogers’s Ignite product currently offers more advanced features.
Nonetheless, Shawn Omstead, vice-president of residential product development at BCE, says he believes Rogers took too long to launch an updated television product. In early 2017, BCE started targeting cord-cutters with Alt TV, a cheaper, app-based service with no set-top box that offers traditional live television stations using streaming devices such as Apple TV, and requires a Bell internet subscription.
“We saw the market shifting a number of years ago,” Mr. Omstead said. "I think what Rogers is doing caters to a certain segment of the market − the higher-end segment of the market − but it really doesn’t have the breadth of services that we offer. Back in 2012 when Comcast first launched the X1 platform, it was a great idea. If Rogers had launched that product six years ago … instead of spending a lot of time, money and effort developing their own platform, it would have been more competitive.”
“We haven’t done anything specific to react because we kind of look at Rogers as just now catching up to where Fibe TV has been,” Mr. Omstead said.
Although their service territories don’t overlap exactly (BCE also has a large presence in Quebec), BCE and Rogers are in an ongoing contest for the residential market, particularly in Toronto. They also fight over internet quality and both recently launched plug-in “pods” to extend the range of WiFi coverage in the home.
BCE has invested more than $1-billion in Toronto alone to bring fibreoptic cables directly to its customers’ doors, replacing slower copper telephone wires. As of the end of June, it was available to more than 70 per cent of homes and businesses in the city and it recently announced it would offer internet speeds of up to 1.5 gigabits per second in parts of Ontario where its fibre is available (with other areas to follow later).
“The Toronto market has never been more competitive," Mr. Omstead said. "I certainly think we’re in the driver’s seat with respect to where we rolled out the fibre.”
Rogers, meanwhile, has used software upgrades and installed more fibre in its own cable network to improve its internet service, and has offered gigabit speeds across its entire coverage area for about a year. “We’re not going to take a backseat to anybody on broadband,” Mr. Hartling said.
BCE added 21,000 new IPTV customers in the second quarter, more than the 16,000 it added in the same period last year, an increase it attributed in part to customers signing up for Alt TV. Rogers lost 9,000 cable subscribers, but that decline came during a trial launch of Ignite TV and it was an improvement over a loss of 25,000 the previous year. Plus, Rogers added 23,000 new internet subscribers; BCE added 11,000.
In recent notes to investors, Barclays analyst Phillip Huang said he expects Ignite TV “will further extend [Rogers’s] arsenal for retention” rather than drive market-share gains.